ROCKDALE COUNTY BOARD OF EDUCATION CONYERS, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor 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 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 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 I NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 27 ROCKDALE 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 31 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND- QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 33 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS 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 May 6, 2005 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 ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) ofthe Rockdale County Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Rockdale County Board of Education, as of June 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2004ARL-11 In accordance with Government Auditing Standards, we have also issued our report dated May 6, 2005, 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 grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 27 respectively, are not a required part ofthe 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. A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24. Respectfully submitted, RWH:gp 2004ARL-11 State Auditor ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 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, 2004. 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 2004 are as follows: On the District-wide financial statements, the assets of the School District exceeded liabilities by $106.0 million. Of this amount, $11.7 million is unrestricted and is available for spending at the School District's discretion. The School District had $108.8 million in expenses relating to governmental activities; only $60.6 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $61.4 million were adequate to provide for these programs. As stated above, general revenues accounted for $61.4 million or 50% of all revenues totaling $122 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 and fund financial statements. The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements 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. ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-wide Statements The District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors. The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities. Fund Financial Statements The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds. Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method ofaccounting 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. 11 ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. Financial Analysis of the School District as a Whole Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal year 2004 compared to fiscal year 2003. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2004 Year 2003 Assets Current and Other Assets Capital Assets, Net $ 36,996,197 $ 25,789,134 89,835,958 90,238,819 Total Assets $ 126.832,155 $ 116,027,953 Liabilities Current and Other Liabilities Long-Term Liabilities $ 9,742,696 $ 9,941,342 11,050.000 13,325,000 Total Liabilities $ 20,792.696 $ 23,266,342 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 78,785,958 15,519,960 11,733,541 $ 76,913,819 5,998,779 9,849,013 Total Net Assets $ 106,039.459 $ 92,761.611 Total net assets increased $13.3 million in fiscal year 2004. Table 2 shows the changes in net assets for fiscal year 2004 compared to the changes in net assets for fiscal year 2003. 111 ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Fiscal Year 2004 Year 2003 $ 3,002,579 57,196,828 376,385 $ 2,936,554 57,377,826 Total Program Revenues $ 60,575,792 $ 60,314,380 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 39,626,376 158,645 8,123 15,268,891 1,417,717 493,014 1,684,972 243,807 2,552,194 $ 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 Total General Revenues $ 61,453,739 $ 48,914,207 Total Revenues $ 122,029,531 $ 109,228,587 Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt $ 69,679,372 3,715,406 2,561,446 2,641,444 1,329,722 6,055,971 1,351,828 7,651,810 4,948,154 1,487,450 861,592 5,828,175 639,313 $ 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 Total Expenses $ 108,751,683 $ 108,272,776 Increase in Net Assets $ 13,277,848 $==="'9='=55==81~1 lV ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services comparing fiscal year 2004 with fiscal year 2003. It identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2004 Year 2003 Net Cost of Services Fiscal Fiscal Year 2004 Year 2003 Instruction $ 69,679,372 $ 70,107,143 $ 26,724,404 $ 20,073,113 Support Services Pupil Services 3,715,406 3,537,337 2,838,864 2,773,161 Improvement of Instructional Services 2,561,446 2,096,109 1,920,971 1,548,148 Educational Media Services 2,641,444 2,914,932 1,480,970 1,768,829 General Administration 1,329,722 1,111,057 -309,471 837,975 School Administration 6,055,971 6,075,594 3,701,609 6,011,060 Business Administration 1,351,828 1,419,405 1,351,828 1,419,050 Maintenance and Operation of Plant 7,651,810 8,020,984 4,112,024 8,019,536 Student Transportation Services 4,948,154 4,026,651 3,536,311 2,520,854 Central Support Services 1,487,450 1,490,271 1,442,846 1,144,009 Other Support Services 861,592 742,572 815,556 212,744 Operations of Non-Instructional Services Food Services 5,828,175 5,448,901 -79,334 348,097 Interest on Short-Term and Long-Term Debt 639,313 1,281,820 639,313 1,281,820 Total Expenses $108,751.683 $108,272.776 $ 48,175.891 $ 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 $125,108,254 and total expenditures and other financing uses of $113,676,414. 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 2004, 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. V ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 The School District budget goals for fiscal year 2004 were - 3% average pay raise Maintain low student: teacher ratios Computer and networking upgrades For the general fund, the actual revenues of $107.9 million exceeded the final budgeted amounts of $100.8 million by $7.1 million. This difference was due to the property tax collections being slightly over budgeted primarily due to the growth in the county in residential housing and the inclusion of the principals' accounts and grants on our financial statements but not included in our budget. The actual expenditures of $105.7 million exceeded the final budgeted expenditure amount of $104.0 million by $1.7 million. This difference was due to the inclusion of the principals' accounts in our financial statements but not in our budget. General Fund revenues and other financing sources exceeded the expenditures and other financing uses by $2.2 million. The School District has made a concerted effort to raise fund balance and this result is evidence of their work. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2004, the School District had $89.8 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation for fiscal year 2004 compared to fiscal year 2003 balances. Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2004 Year 2003 Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements $ 7,537,663 758,717 76,151,094 2,672,617 2,715,867 $ 5,343,324 77,914 78,325,398 2,505,304 3,986,879 Total $ 89,835,958 $ 90,238,819 Due to the ongoing growth in the county, the School District has numerous construction projects including new buildings, additions and renovations. VI ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Debt At June 30, 2004, the School District had $11.1 million in bonds outstanding with $1.6 million due within one year. Table 5 summarizes the School District's debt which includes general obligation bonds for fiscal year 2004 compared to fiscal year 2003 balances. Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2004 Year 2003 General Obligation Bonds $ 11,050,000 $ 13,325,000 At June 30, 2004, 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 - 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 lowing 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 approximately 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. Vll ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 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 citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information contact 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.kl2.ga.us. vm ROCKDALE COUNTY BOARD OF EDUCATION ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects 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 $ 14,473,251 11,608,517 3,577,111 6,748,847 271,373 45,292 271,806 7,537,663 758,717 5,244,810 107,298,834 13,406,155 -44,410,221 $ ===12=6-,8=3-2,!,,;,1;;;,;55;;,,, $ 1,949,150 7,547,532 90,009 50,782 105,223 1,580,000 9,470,000 $ 20,792,696 $ 78,785,958 855,752 27,838 14,636,370 11 733 541 $ 106,039,459 $===12=6-,8=3=2!,,;,15;;,,;5~ ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 EXPENSES CHARGES FOR SERVICES GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities $ 69,679,372 $ 3,715,406 2,561,446 2,641,444 1,329,722 6,055,971 1,351,828 7,651,810 4,948,154 1,487,450 861,592 5,828,175 639,313 108,751,683 $ 288,858 2,713,721 3,002,579 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 Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -4- EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 42,571,511 $ 874,041 640,475 1,156,385 1,639,193 2,346,817 3,528,609 1,165,561 42,685 46,036 3,185,515 $ 57,196,828 $ 94,599 $ 2,501 4,089 7,545 11,177 246,282 1,919 8,273 376,385 $ -26, 724,404 -2,838,864 -1,920,971 -1,480,970 309,471 -3,701,609 -1,351,828 -4,112,024 -3,536,311 -1,442,846 -815,556 79,334 -639 313 -48, 175,891 $ 39,626,376 158,645 8,123 15,268,891 1,417,717 493,014 1,684,972 243,807 2,552,194 $ 61,453,739 $ 13,277,848 92,761,611 $ ===1=06,...,0=3=9=,4=59= -5- ROCKDALE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2004 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenue Total Liabilities FUND BALANCES Reserved for: 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 GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 13,766,450 $ 705,092 $ 241,210 11,366,031 1,132,994 6,748,847 271,373 45,292 271,806 2,706,698 1,709 $ 14,473,251 1,276 11,608,517 2,680 3,842,372 6,748,847 271,373 45,292 271,806 $ 22,477,972 $ 14,777,821 $ 5,665 $ 37,261,458 $ 1,949,150 7,547,532 $ 105,223 $ 9,601,905 $ 90,009 50,782 140 791 $ 1,949,150 7,547,532 90,009 50,782 105,223 $ 9,742,696 $ 583,946 $ 271,806 $ 14,636,370 16,372 12,003,943 660 $ 12,876,067 $ 14,637,030 $ $ 583,946 5,665 5,665 271,806 14,636,370 16,372 12,003,943 660 5,665 $ 27,518,762 $ 22,477,972 $ 14,777,821 $ 5,665 $ 37,261,458 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. 2004 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 Payable $ 27,518,762 $ 7,537,663 758,717 5,244,810 107,298,834 13,406,155 -44,410,221 89,835,958 -265,261 -11,050,000 Net Assets of Governmental Activities (Exhibit "A") $ 106,039,459 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. 2004 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 Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 39,682,803 $ 1,857,804 $ 15,268,891 51,547,241 130,103 7,580,841 3,002,579 158,769 79,179 4,030,571 $ 107,860,608 $ 15,478,173 $ 136,472 $ 52,927 5,859 39,819,275 17,179,622 51,677,344 7,580,841 3,002,579 243,807 4,030,571 195,258 $ 123,534,039 $ 67,778,248 $ 67,778,248 3,646,993 2,561,446 2,558,399 1,309,408 $ 5,981,363 1,349,604 7,376,016 4,994,675 1,552,005 861,592 5,709,590 20,314 $ 38,950 3,447,059 2,224 3,646,993 2,561,446 2,558,399 1,329,722 5,981,363 1,351,828 7,414,966 4,994,675 1,552,005 861,592 5,709,590 3,447,059 2,275,000 639,313 2,275,000 639,313 $ 105,679,339 $ 3,506,323 $ 2,916,537 $ 112,102,199 $ 2,181,269 $ 11,971,850 $ -2.721,279 $ 11,431,840 $ 1,574,215 $ $ -1,574,215 $ -1,574,215 $ 1,574,215 $ $ 2,181,269 $ 10,397,635 $ -1,147,064 $ 10,694,798 4,239,395 1,152,729 1,574,215 -1,574,215 0 11,431,840 16,086,922 Fund Balances - Ending $ 12,876,067 $ 14,637,030 $ The notes to the basic financial statements are an integral part of this statement. -8- 5,665 $ 27,518,762 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, 2004 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. The net effect of various miscellaneous transactions involving capital assets is to decrease net assets. 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 $ 11,431,840 $ 4,646,139 -3,570,623 1,075,516 -26,131 -1,478,377 2,275,000 Change in Net Assets of Governmental Activities (Exhibit "B") $ 13,277,848 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, 2004 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 $ 17,750 $ 330,157 56,297 $ 74 047 $=~33~0.i:;,,1~57~ $ 330,157 $ _ _.,:..74....:=-04~7:..... $ 74 047 $ ==3~3~0.i:;1,,~57~ 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, 2004 ADDITIONS Investment Earnings Interest DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending EXHIBIT"H" PRIVATE PURPOSE TRUSTS $ 577 $ 1,000 $ -423 74470 $ ===74=====04=7= 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, 2004 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 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. - 12 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST) and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor 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 trust may be expended to provide college scholarships to the students from Rockdale County, Georgia. Agency funds account for assets held by the School District as an agent for various funds, government 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 - 13 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates 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 ofthe United States government, - 14 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 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 2003 tax digest year (calendar year) on August 27, 2003 (levy date). Taxes could be paid in two installments on October 20, 2003 and December 20, 2003 (due dates). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The 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, 2004, for maintenance and operations amounted to $39,674,680 and for school bonds amounted to $136,472. The tax millage rate levied for the 2003 tax year (calendar year) for the Rockdale County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 21.8 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $15,268,891 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. - 15 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings 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 - 16 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 ofinsurance, 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. If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities ofthe State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. - 17 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $19,004,882. The amounts ofthe total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2004, as follows: Risk Category Bank Balance 1 $ 301,709 2 0 3 18,703,173 Total $ 19,004.882 CATEGORIZATION OF INVESTMENTS At June 30, 2004, the carrying value of the School District's total investments was $11,664,814 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 of Georgia, 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 of the 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 weekly 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 - 18 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 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, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 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, 2003 Increases Balances Decreases June 30, 2004 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 5,343,324 $ 2,194,339 77 914 747,035 $ $ 7,537,663 66,232 758,717 Total Capital Assets Not Being Depreciated $ 5,421,238 $ 2,941,374 $ 66,232 $ 8,296,380 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 106,981,518 $ 12,608,966 9,299,374 317,316 $ 107,298,834 1,036,145 $ 238,956 13,406,155 417,536 4,472,100 5,244,810 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 28,656,120 10,103,663 5,312,494 2,491,620 843,886 235,117 214,011 3,018,668 31,147,740 10,733,538 2,528,943 Total Capital Assets, Being Depreciated, Net $ 84,817,581 $ -1,799,626 $ 1,478,377 $ 81,539,578 Governmental Activity Capital Assets - Net $ 90,238,819 $ 1,141,748 $ 1,544,602 $ 89,835,958 - 19 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2004 EXHIBIT"I" Note 5: CAPITAL ASSETS 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 $ 2,286,111 $ 68,632 112,222 207,079 306,758 310,111 52,651 1,057,453 227,059 $ 3,570,623 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, 2004, 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 $ $ 705,062 $ $ 11,365,401 1,709 1,276 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2004, consisted of the following: Transfer to Transfers From District-wide Capital Projects Debt Service Funds $ 1,574,215 -20- ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 7: INTERFUND TRANSFERS Transfers are used for payment of bonds. 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 participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse) and automobile risks. Payment of excess insurance for the system varies by line of coverage. The School District 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 expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. 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: 2003 2004 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 154 454 $ 154 454 $ 0 $ 0 $ 207,175 $ 207 175 $ 0 The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: - 21 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 8: RISK MANAGEMENT 2003 2004 Beginning ofYear Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 10 304 $ 10,304 $ 0 $ 0 $ 14 301 $ 14 301 $ 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 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% $ 11,050,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2003 $ 13,325,000 Deductions Debt Retired 2,275,000 Balance June 30, 2004 $ 11,050,000 Portion of Long-Term Debt Due within One Year $ 1,580,000 At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows: -22- ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 9: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2005 2006 2007 2008 2009 2010 $ 1,580,000 $ 1,675,000 1,780,000 1,885,000 2,005,000 2,125,000 291,626 502,673 414,735 318,615 216,825 111,563 Total Principal and Interest $ 11,050,000 $ 1,856,037 Note 10: PRIOR YEAR DEFEASEMENT OF DEBT In fiscal year 2003, the School District defeased certain general obligation bonds by placing Special Purpose Local Option Sales Tax (SPLOST) proceeds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2004, $14,525,000 of bonds are outstanding and are considered defeased. Note 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $973,069 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $963,107 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 $9,962 Note 12: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2004, together with funding available: - 23 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 12: SIGNIFICANT COMMITMENTS Project Unearned Executed Contracts Funding Available From State SA0lS-722-295 SAO 1S-722-296 SA0l S-722-297 Salem High School - Memorial Middle School Bus Connector $ 535,000 $ 4,526,969 412,697 424,242 552,500 5,764,230 109,867 $ 1,610,064 $ 10,715,441 The amounts described in this note are not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 14: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. 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: - 24- ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 14: RETIREMENT PLANS Fiscal Year 2004 2003 2002 Percentage Contributed 100% 100% 100% Required Contribution $ 5,796,708 $ 5,785,362 $ 5,501,257 - 25 - ROCKDALE COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2004 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 38,335,720 $ 38,335,720 $ 39,682,803 1,409,000 1,409,000 1,857,804 49,949,240 49,949,240 51,547,241 7,314,901 7,314,901 7,580,841 3,230,990 3,230,990 3,002,579 160,000 160,000 158,769 387,000 387,000 4,030,571 $ 100,786,851 $ 100,786,851 $ 107,860,608 $ 65,799,558 $ 67,241,046 $ 67,778,248 2,883,571 2,355,186 2,316,438 1,299,390 5,965,584 1,345,422 7,732,311 3,830,480 1,578,784 181,491 5,648,661 3,192,598 2,441,064 2,375,862 1,349,330 5,967,263 1,535,606 7,750,323 4,637,896 1,639,528 217,916 5,659,336 3,646,993 2,561,446 2,558,399 1,309,408 5,981,363 1,349,604 7,376,016 4,994,675 1,552,005 861,592 5,709,590 $ 100,936,876 $ 104,007,768 $ 105,679,339 $ -150,025 $ -3,220,917 $ 2,181,269 $ 557,285 $ 557,285 -557,285 -557,285 $ 0 $ 0 $ -150,025 $ -3,220,917 $ 2,181,269 11,583,321 11,583,321 10,694,798 Fund Balances - Ending $ 11,433,296 $ 8,362,404 $ 12,876,067 Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 27 - ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2004 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture. U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U. S. Department of Education Defense, U. S. Department of Direct U. S. Marine Corps R.O.T.C. Program Total Federal Financial Assistance N/A = Not Available CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 N/A N/A $ $ (2) 4,984,782 4,984,782 10.550 N/A $ 414 829 5,399,611 94.004 N/A $ 1 930 84.027 84.173 N/A $ N/A $ 1,754,579 66 318 1,820,897 84.332 84.365 84.318 84.367 84.186 84.298 84.010 84.048 N/A N/A N/A N/A N/A N/A N/A N/A $ 194,200 58,820 47,574 429,182 81,206 71,149 1,786,115 115 492 4,604,635 $ 112 850 $ ===10='=11=9=,0=2=6 - 28- ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2004 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation 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 ($525,094) were not maintained separately and are included in the 2004 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the 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 fund financial statements. See notes to the basic financial statements. - 29 - ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle 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 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 Mentoring Program National Teacher Certification Pay for Performance Preschool Handicapped Program Lottery Programs Student Information System SIS Conversion Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. - 30 - GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 312,898 $ 312,898 3,366,319 212,459 7,444.459 867,436 4,161,448 357,543 7,965,389 6,824,376 1,355,317 426,301 785,539 3,287,022 899,193 89,004 1,433,796 76,630 599,330 465,823 1,152,722 368,542 237.461 1,282,584 2,282,131 3,527,650 1,098,574 246,282 272,187 52,265 708,136 322,652 138,637 -2,793,295 86,757 147,637 963,107 18,495 57,874 172,540 171,184 57,440 35,435 3,366,319 212,459 7,444,459 867,436 4,161.448 357,543 7,965,389 6,824,376 1,355,317 426,301 785,539 3,287,022 899,193 89,004 1,433,796 76,630 599,330 465,823 1,152,722 368,542 237,461 1,282,584 2,282,131 3,527,650 1,098,574 246,282 272,187 52,265 708,136 322,652 138,637 -2,793,295 86,757 147,637 963,107 18,495 57,874 172,540 171,184 57,440 35,435 $ 9 962 130,103 130,103 9 962 $ 51,547,241 $ 130 103 $ 51 677,344 ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2004 SCHEDULE "4" PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR(3) AMOUNT EXPENDED IN PRIOR YEARS(3) PROJECT STATUS 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. $ 27,300,000 $ 33,779,280 $ 609,037 $ 33,170,243 Ongoing 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. 65,000,000 65,000,000 2,897,286 Ongoing 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, 2010. 15,000,000 15,000,000 1,574,215 Ongoing $ 107,300,000 $ 113,779,280 $ 5,080,538 $ 33,170,243 (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. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 31 - ROCKDALE COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE} ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2004 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle 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) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 4,025,796 $ 3,616,872 $ 145,319 $ 3,762,191 306,782 237,332 198 237,530 9,008,137 10,266,321 477,230 10,743,551 1,098,329 787,387 200 787,587 5,027,421 6,388,670 294,693 6,683,363 454,137 9,621,277 8,296,193 1,623,847 6,572,290 1,783,554 91,612 724,880 551,229 367,486 7,180 10,066,434 11,109,748 1,464,705 662,847 939,316 4,470,637 241,486 1,211,557 82,791 458,487 714 789 197 296,255 332,346 110,999 32,585 55,673 25,439 713 9,052 2,177 21,614 8 311 367,683 7,180 10,362,689 11,442,094 1,575,704 695,432 994,989 4,496,076 242,199 1,220,609 84,968 480,101 723,100 $ 49,185,484 $ 53,094,045 $ 1,813,001 $ 54,907,046 1,392,296 287 414 1,745,316 52,659 238,678 139,519 1,983,994 192 178 TOTAL QBE FORMULA FUNDS $ 50,865,194 $ 54,892,020 $ 2,191,198 $=~5;,;,,7,~0;;;;83~,2;;,,;1~8 (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 May 6, 2005 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 INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofRockdale County Board ofEducation as ofand for the year ended June 30, 2004, which collectively comprise Rockdale County Board of Education's basic financial statements and have issued our report thereon dated May 6, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered 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 an opinion on the internal 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 reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. 2004YB-10 Compliance and Other Matters 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 grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Rockdale County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~~~ Russell W. Hinton State Auditor RWH:gp 2004YB-10 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 May 6, 2005 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 ofits major Federal programs for the year ended June 30, 2004. 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 ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the 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. 2004SA-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 ofits major Federal programs for the year ended June 30, 2004. 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 reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the 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, ltj:--1J.~ Ru ell W. Hinton State Auditor RWH:gp 2004SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS ROCKDALE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Rockdale County Board ofEducation's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Rockdale County Board ofEducation did not disclose any reportable conditions related to the financial statements. 3. Noncompliance Material to the Financial Statements The audit of the Rockdale 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 Rockdale County Board ofEducation did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Rockdale County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Rockdale County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $303,570. 9. Low Risk Auditee The Rockdale 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 No matters were reported. - 1- ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -2-