SCREVEN COUNTY BOARD OF EDUCATION SYLVANIA, 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 SCREVEN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 10 H NOTES TO THE BASIC FINANCIAL STATEMENTS 11 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 27 SCREVEN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 28 3 SCHEDULE OF STATE REVENUE 30 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 32 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 33 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 September 1, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Screven 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 H) of the Screven 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 Screven 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 opm1ons. 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 Screven County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 The Screven County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements and consolidated its individual school activity accounts for inclusion in the basic financial statements. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Screven County Board of Education has implemented a new financial reporting model as required by provisions ofGovernmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. In accordance with Government Auditing Standards, we have also issued our report dated September 1, 2004, on our consideration of the Screven County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, 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 Screven 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, LU~ RWH:as 2003-34ARL-11 State Auditor SCREVEN COUNTY BOARD OF EDUCATION SCREVEN COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003 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 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 EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 498,805 6,490,803 302,264 1,888,358 286,334 42,948 29,284 880,334 1,143,249 1,180,085 24,339,464 3,155,438 -7,426,097 $ 437,934 1,916,810 850,126 198,653 805,000 3,445,000 $ 7,653,523 $ 20,884,454 518,667 996,753 58,174 2,699,698 $ 25,157,746 $ ===3=2"=,8=11=la,2=6==9 The notes to the basic financial statements are an integral part of this statement. -3- SCREVEN COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2003 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 15,742,190 955,008 482,797 355,556 564,256 1,544,409 267,500 1,780,978 1,543,822 11,175 177,443 233,590 $ 1,674 1,529,478 74 355 $ 25,264,231 $ 365,636 44,886 246,915 657 437 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 $ 11,600,726 $ 402,691 248,435 273,316 528,888 482,537 693,738 719,091 77,677 1,290,996 $ 16,318,095 $ 13,099 $ 118 369 33 325 1,888 5,621 716 1,450 23619 $ -4,128,365 -552,199 -234,362 -81,871 -35,335 -1,061,547 -267,500 -1,085,352 -819,110 -11,175 -99,050 132,046 43,212 9,883 -74 355 -8,265,080 $ 3,320,727 1,148,204 13,378 2,013,296 104,195 795 613 $ 7 395 413 $ -869,667 26,027,413 $ ======25..,,1..,5=7'=74=6= -5- SCREVEN COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2003 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 635,190 $ 2,700,634 $ 3,000,286 154,646 1,888,358 262,715 42,948 29,284 23,619 5,885 $ 789,883 200,985 641,075 6,490,803 355,631 1,888,358 286,334 42,948 29284 Total Assets $ 5,713,775 $ 3,023,905 $ 996,753 $ ======9a!a,7=3=4'6=43=3= LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Contracts Payable Retainages Payable $ $ 4~7,934 1,916,810 142,270 850,126 198,653 Total Liabilities $ 2,354,744 $ 1,191,049 FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund $ 489,383 $ 29,284 $ 1,832,856 2,840,364 Total Fund Balances $ 3,359,031 $ 1,832,856 $ $ $ $ 996,753 996,753 $ 142,270 437,934 1,916,810 850,126 198 653 3,545,793 489,383 996,753 29,284 1,832,856 2,840,364 6,188,640 Total Liabilities and Fund Balances $ 5,713,775 $ 3,023,905 $ 996,753 $ ======9a!a7=3=46=43=3= The notes to the basic financial statements are an integral part of this statement. -6- SCREVEN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2003 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Bonds Payable, which are Long-Term Liabilities, are not due and payable in the current period and therefore are not reported as liabilities in the funds. $ 6,188,640 $ 880,334 1,143,249 1,180,085 24,339,464 3,155,438 -7,426,097 23,272,473 -53,367 -4,250,000 Net Assets of Governmental Activities (Exhibit "A") $ 25,157,746 The notes to the basic financial statements are an integral part of this statement. -7- SCREVEN 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 Enterprise Operations Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds of Long-Term Capital-Related Debt - Par Value 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 $ 3,320,438 13,378 15,405,946 2,925,445 $ 657,437 41,558 794,909 $ 23,159,111 $ $ $ 1,148,204 23,619 57,470 704 5,167 3,320,438 1,161,582 15,405,946 2,949,064 657,437 104,195 795,613 81,793 $ 1,153,371 $ 24,394,275 $ 14,685,749 944,991 482,797 324,354 561,449 1,516,967 180,201 $ 1,647,946 1,189,057 11,175 116,948 233,590 1,674 1,441,858 87,299 2,411,638 $ $ 23,338,756 $ 2,498,937 $ $ -179 645 $ -2,417, 144 $ $ 14,685,749 944,991 482,797 324,354 561,449 1,516,967 267,500 1,647,946 1,189,057 11,175 116,948 233,590 1,674 1,441,858 2,411,638 710,000 74 355 710,000 74 355 784,355 $ 26,622,048 369,016 $ -2,227,773 $ 4,250,000 $ $ -175,897 $ -175 897 $ 4,250,000 $ $ -355,542 $ 1,832,856 $ 3,714,573 $ 175,897 175 897 $ 544,913 $ 451,840 4,250,000 175,897 -175 897 4,250,000 2,022,227 4,166,413 Fund Balances - Ending $ 3,359,031 $ 1,832,856 $ 996,753 $ =~6.,;1,~88~~64~0;,,, The notes to the basic financial statements are an integral part of this statement. -8- SCREVEN 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 11 11) $ 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 $ 1,341,397 -693,580 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. Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from General Obligation Bonds Issued. 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, this amount consists of Bond Principal Retirements. 2,022,227 647,817 289 -4,250,000 710,000 Change in Net Assets of Governmental Activities (Exhibit B 11 11) $ ==-=86=9=,6=67= The notes to the basic financial statements are an integral part of this statement. -9 - SCREVEN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ===12='=13=1= $ ===1=2 = 131= The notes to the basic financial statements are an integral part of this statement. -10- SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Screven 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 Screven 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: - 11 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and contracts from Georgia Department of Education to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, 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. - 12 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit costs and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements. RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $388,241 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$194,816 at July 1, 2002. This change is in accordance with generally accepted accounting principles. General Fund Balance July 1, 2002 $ 3,131,516 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 388,241 194.816 General Fund Balance July 1, 2002 (Restated) $ 3,714.573 CHANGES IN ACCOUNTING PRINCIPLES The Screven County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. The provisions of GASB Statement No. 34 require the inclusion of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: - 13 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund (Restated) July 1, 2002 Debt Service Fund $ 3,714,573 451,840 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable $ 4,166,413 29,357,173 -6,732,517 -53,656 -710,000 Net Assets Beginning (See Exhibit "B") $ 262027A13 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, - 14 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Screven County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 17, 2002 (levy date). Taxes were due on December 20, 2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Screven County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $3,320,438. The tax millage rate levied for the 2002 tax year (calendar year) for the Screven County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 10.95 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,148,204 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 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost ofnormal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 $ 5,000 NIA 80 years 25 to 80 years 4 to 14 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. - 16 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" 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 ofsuch surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination ofthe 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 ofthe State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $2,620,350. The amounts ofthe total bank balances are classified into three categories of credit risk: - 17 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS 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, 2003, as follows: Risk Category Bank Balance 1 $ 203,287 2 2,417,063 3 0 Total $ 2,620,350 CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value ofthe School District's total investments was $5,968,572 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury 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 ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio and Extended Term Portfolio) does not provide for investment in derivatives or similar investments. A description of the 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. - 18 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS 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. The Extended Term Portfolios consist of Fund 3 "Georgia Extended Asset Pool", Fund 7 and Fund 8. The Georgia Extended Asset Pool is a variable net asset value investment pool which follows Standard and Poor's criteria for AAAf rated funds. The pool is not registered with the SEC as an investment company. The pool's primary objective is the prudent management of public funds on behalf of the State of Georgia and local governments seeking income higher than money market rates. Net Asset Value (NAV) is calculated daily to determine current share price. NAV is calculated by taking the closing fair value of securities owned plus other assets and subtracting liabilities. The remainder is then divided by the total number ofshares outstanding to compute NAV per share (current share price). The pool distributes earnings (net ofmanagement fees) on a monthly basis and determines participant's shares sold and redeemed based on the current share price, which at June 30, 2003, was at $2.03 per share. The Office of Treasury and Fiscal Services has hired a third party bank, Investors Bank and Trust, to perform custody and valuation services to include calculation ofthe NAV. Pooled cash and cash equivalents and investments are reported at fair value. 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 offunds from local governments, operating and trust funds of State agencies, and current operating funds of the State's General Fund. Investments in the Georgia Extended Asset Pool consist generally ofsecurities issued or guaranteed as to principal and interest by the U.S. Government or any of its agencies or instrumentalities and repurchase agreements. The duration at June 30, 2003 was 0.70 years. Investments in Fund 7 consist generally of repurchase agreements and certain U. S. Government Securities. The average investment duration for Fund 7 on June 30, 2003 was 1.17 years. Investments in Fund 8 consist generally of repurchase agreements and certain U. S. Government Securities, which include mortgage-backed securities such as collateralized mortgage obligations and adjustable rate mortgages. These mortgage-backed securities are reported as U. S. Government Securities in the disclosure of custodial risk. Investments in Fund 8 are transacted by an external investment management firm under direction ofinvestment advisory agreements executed between the Office and the investment management firm. The agreement directs the investment firm to utilize the Merrill Lynch 1-3 year Treasury Index in managing the average duration of the overall portfolio, excluding cash, to within plus or minus 6 months of the duration ofthe Index. The average investment duration for Fund 8 on June 30, 2003 was 1.49 years. In addition, the investment advisory agreements place limitations on individual security purchases and holdings as follows: - 19 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS 1) Limits the duration of any security at the time ofpurchase to a maximum offive (5) years. 2) Requires any mortgage-backed security, at the time of purchase and periodically, thereafter, to pass a "stress test" which provides for a duration profile not to exceed 7 years given an instantaneous and permanent interest yield increase of 300 basis points. 3) With the exception ofU. S. Treasury securities, limits individual security investments to no more than the greater of$5 million or 10% ofthe separate portfolio's total investments. 4) Prohibits investments in interest only strips, principal only strips, inverse floaters, and Z tranche securities. 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 l, 2002 Increases Decreases Balances June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 880,334 $ 0 $ 1,143,249 0 $ 880,334 1,143,249 Total Capital Assets Not Being Depreciated $ 880,334 $ 1,143,249 $ 0 $ 2,023,583 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 24,339,464 3,017,040 $ 1,120,335 $ 138,398 59,750 0 $ 24,339,464 3,155,438 1,180,085 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 4,237,233 1,836,589 658,695 409,172 220,214 64194 4,646,405 2,056,803 722,889 Total Capital Assets, Being Depreciated, Net $ 21,744,322 $ -495,432 $ 0 $ 21,248,890 Governmental Activity Capital Assets - Net $ 22,624,656 $ 647,817 $ 0 $ 23,272,473 - 20- SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 5: CAPITAL ASSETS Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services $ Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 3,479 10,837 975 9,531 55,433 165,066 21,011 384,660 266,332 42,588 Note 6: RESTRICTED ASSETS $==6=93-,5=8=0 Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds 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: Restricted Cash and Cash Equivalents: Debt Services Restricted Investments: Debt Services Capital Acquisitions District-wide Capital Projects Bond Proceeds Debt Service Funds $ $ $ 3,000,286 5,885 789,883 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2003, consisted of the following: Transfer to Debt Service Funds Transfers From General Fund $===1==75-,8==9==7 - 21 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 7: INTERFUND TRANSFERS Transfers are used to move revenues collected by the General Fund to the Debt Service Fund to retire bond debt. 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 is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis ofthe percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims 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: Beginning o f Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability 2002 2003 $ 4 373 $ 227 $ 4 600 $ 0 $ 0 $ 7 421 $ 1 878 $ 5 543 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000. -22 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 8: RISK MANAGEMENT The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 50,000 $ 100,000 Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2002 2.56% $ 4,250.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2002 $ 710,000 Additions G.O. Bonds 4,250,000 Deductions Debt Retired 710,000 Balance June 30, 2003 $ 4,250.000 Portion of Long-Term Debt Due within One Year $ 805,000 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: - 23 - SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 9: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2004 2005 2006 2007 2008 $ 805,000 $ 830,000 850,000 870,000 895.000 98,496 77,568 56,064 34,048 11.456 Total Principal and Interest $ 4,250,000 $ 277.632 Note 10: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $236,554 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 $198,210 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 $38,344 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, together with funding available: Project Unearned Executed Contracts Funding Available From State SA0lS-724-145 $ 1,861.796 $====7=53=,3=2=1 The amounts described in this note are not reflected in the basic financial statements. - 24- SCREVEN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" 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. 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% $ 1,197,314 $ 1,152,901 $ 1,325,676 - 25 - SCREVEN 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 Enterprise Operations Community Services Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING USES Other Uses Net Change in Fund Balances Fund Balances - Beginning Adjustments Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 2,909,866 $ 2,909,866 $ 3,320,438 5,000 5,000 13,378 15,376,578 15,160,499 15,405,946 2,804,418 3,225,919 2,925,445 254,100 254,100 657,437 52,730 52,730 41,558 66000 66,000 794 909 $ 21,468,692 $ 21 674114 $ 23,159,111 $ 14,367,246 $ 14,782,658 $ 14,685,749 988,401 341,533 357,550 567,132 1,438,104 188,870 1,712,009 1,330,273 14,876 128,651 44,000 2,000 1,545,830 1,038,434 466,705 357,550 623,699 1,438,104 188,870 1,712,009 1,362,324 14,876 101,651 44,000 2,000 1,545,830 944,991 482,797 324,354 561,449 1,516,967 180,201 1,647,946 1,189,057 11,175 116,948 233,590 1,674 1,441,858 $ 23,026,475 $ 23,678,710 $ 23,338,756 $ -1,557,783 $ -2,004,596 $ -179,645 -285,000 -285,000 $ -1,842,783 $ -2,289,596 $ 4,062,494 4,062,494 -4149 -4149 -175 897 -355,542 3,714,573 $ 2,215,562 $ 1,768,749 $===3=,3=5=9,=03=1= See notes to the basic financial statements. - 27 - SCREVEN 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 First District Regional Educational Service Agency d/b/a Live Oak Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies School Improvement Title II Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Title Ill Technology Literacy Challenge Fund Grants TitleV Innovative Education Program Strategies Title VI Rural and Low Income Schools School Renovation - Technology Vocational Education - Basic Grants to States High School Program Basic Grant Tech Prep Education Total U.S. Department of Education - 28- CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 . 10.555 N/A N/A $ $ (2) 1,349,708 1,349,708 10.550 N/A $ 64 896 1414604 84.027 84.173 84.027 N/A $ N/A N/A $ 346,248 18,730 15 683 380,661 84.011 . 84.010 . 84.010 84.281 84.318 84.367 84.318 84.298 84.358 84.352 84.048 84.243 N/A NIA N/A N/A NIA N/A N/A N/A N/A N/A N/A N/A $ 38,587 828,842 16,774 9,569 16,887 194,542 21,343 26,077 59,911 23,619 79,450 62 027 1,758,289 SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Justice, U.S. Department of Pass-Through From Georgia Department of Juvenile Justice Children and Youth Coordinating Council Juvenile Justice Delinquency Prevention and Treatment Grant CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 16.540 N/A $ _ _ _ __c8=3..c...3 Total Federal Financial Assistance N/A = Not Available $ ===3,.;,17=3;.;,7=2=6 Notes to the Schedule of Expenditures of Federal Awards (1) The amount 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 funds earned on the School Breakfast Program ($277,879) were not maintained separately and are included in the 2003 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 Screven County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. -29 - SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Mid-term Adjustment Hold-Harmless 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 Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom Student Information System Georgia Institute of Technology Student Information System - 30- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 402,906 676,704 218,308 1,437,430 642,662 994,805 296,279 1,997,453 1,322,442 595,341 23,169 676,641 839,551 60,301 197,206 35,990 143,350 278,507 94,999 57,337 419,513 503,758 827,002 618,025 125,075 19,000 75,779 12,034 23,810 2,130 6,913 1,387,286 101,054 35,298 -342,370 32,721 39,836 198,210 48,740 8,482 60,947 83,429 20,857 SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 AGENCY/FUNDING GRANTS Human Resources, Georgia Department of Family Connection Substance Abuse Prevention and Treatment Office of Treasury and Fiscal Services Public School Employees Retirement SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 46,505 22,187 38 344 $ ===1=5=",4=0=5=,9=46=== See notes to the basic financial statements. - 31 - SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "4" PROJECT For the purpose of acquiring land for new schools and acquiring, constructing and equipping the following capital outlay projects: renovations of Screven Elementary School and the Screven County High School auditorium; renovations and/or construction of athletic facilities at Screven County High School; construction of a school system office and operations facility at the old Central Middle School campus; replacement of the roof on the "C" campus portion of Screven County High School; and system-wide renovations, improvements and technology upgrades, modifications, renovations and additions to Screven County High School ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COST(2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 6,200,000 $ 6,200,000 $ 2,462,374 $ 0 Ongoing (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 project. Includes all cost from project inception to completion. (3) The voters of Screven County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 32- SCREVEN COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE} ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2003 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program 724,974 $ 233,812 1,570,067 721,935 1,099,930 315,876 2,191,029 1,469,056 658,729 1,769,116 208,877 39,774 157,910 585,185 $ 167,301 1,562,566 752,945 943,731 578,578 2,286,791 1,944,675 542,478 737,188 774,972 84,859 173,154 72,993 146 454 13,639 $ 1,750 49,427 9,412 34,275 4,251 88,922 132,724 61,741 19,561 8,276 834 4,096 783 2 401 598,824 169,051 1,611,993 762,357 978,006 582,829 2,375,713 2,077,399 604,219 756,749 783,248 85,693 177,250 73,776 148 855 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 11,161,085 $ 11,353,870 $ 432,092 $ 11,785,962 Media Center Program Staff and Professional Development 305,825 63,180 242,604 23,418 55,665 39,879 298,269 63297 TOTAL QBE FORMULA FUNDS $ 11,530,090 $ 11,619,892 $ 527,636 $ ====12='=14,..7=,5=2=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 September 1, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Screven County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Screven County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Screven County Board of Education's basic financial statements and have issued our report thereon dated September 1, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether Screven 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 of our 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 Screven County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-30 control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Screven County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-7241-03-01. 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. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. This report is intended solely for the information and use of the management, members of the Screven 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, w~ RWH:as 2003-34YB-30 State Auditor RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 September 1, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Screven 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 Screven 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. Screven 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 Screven County Board of Education's management. Our responsibility is to express an opinion on Screven 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 Screven 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 Screven County Board of Education's compliance with those requirements. 2003SA-10 In our opinion, the Screven 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, 2003. Internal Control Over Compliance The management of Screven 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 Screven County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Screven 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, .... LU.~ RWH:as 2003SA-10 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SCREVEN COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7241-01-01 FS-7241-01-02 FS-7241-02-01 FS-7241-02-02 Further Action Not Warranted Further Action Not Warranted Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Screven 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 Screven County Board ofEducation disclosed a financial statement reportable condition related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements The reportable condition described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Screven 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 Screven County Board of Education did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Screven County Board ofEducation'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 Screven County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program - Food Services - National School Lunch Program 84.010 Elementary and Secondary Education Act- Title I- Grants to Local Educational Agencies 84.010 Elementary and Secondary Education Act - Title I - School Improvement 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Screven County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7241-03-01 Our examination of the principal's accounts disclosed weaknesses in internal controls as discussed below: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a sample of 25 items, two receipts were not deposited in a timely manner. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping and purchasing functions. Based on a sample of 25 items, nine vouchers lacked adequate supporting documentation; one voucher was posted incorrectly; and two checks were signed by unauthorized personnel. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible at the various principal account sites for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions are segregated and that appropriate accounting controls are utilized. -2- SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7241-03-01 Management's Response: We concur with the finding and realize the importance of separation of duties as an internal control mechanism. Due to current budgetary constraints, the School District is unable to hire additional staff. Steps have been taken, however, to review the accounting procedures in place and implement additional procedures to ensure that the key accounting functions are segregated and that appropriate accounting control are utilized relative to the control categories outlined in finding FS-7241-03-01. We will continue to monitor accounting procedures in an effort to resolve this finding. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3-