SEMINOLE COUNTY BOARD OF EDUCATION DONALSONVILLE, 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 SEMINOLE 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 23 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 24 3 SCHEDULE OF STATE REVENUE 25 SEMINOLE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 26 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 27 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 SEMINOLE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 February 23, 2005 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members of the Seminole County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe Seminole 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 Seminole County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Seminole 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 The Seminole 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. In accordance with Government Auditing Standards, we have also issued our report dated February 23, 2005, on our consideration of the Seminole 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 of that report is to describe the scope ofour testing ofinternal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part ofan 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 23, 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 Seminole County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24. Respectfully submitted, ~~~ Russell W. Hinton State Auditor RWH:gp 2004ARL-11 SEMINOLE COUNTY BOARD OF EDUCATION SEMINOLE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004 EXHIBIT"A" 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 Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs 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- GOVERNMENTAL ACTIVITIES $ 2,706.239 1,074,095 269,001 921,179 856,633 11,417 27,142 310,550 1,460,617 962,528 9,821,359 1,790,953 -2,008,543 $ =====1=8'!=20=3:!a,=17=0= $ 725,426 1,137,957 137,854 86,852 $ 2,088,089 $ 12,337,464 335,966 1,573,648 1,868,003 $ 16,115,081 $ ===c1=8e=,2=03=!'=17=0= SEMINOLE 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 $ 9,349,753 $ 554,591 677,573 186,108 342,975 786,208 180,769 879,718 661,024 0 63,363 1,089,448 2,700 35,062 Total Governmental Activities $ ====1=4,=77=1=,5=30= $ General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous 37,762 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 $ 7,100,075 $ 101,392 571,440 157,009 409,844 317,796 1,511 463,937 345,428 1,024 71,001 858 690 $ 10,399,147 $ 1,204,574 $ 16,245 730 3,531 2,333 72,202 19,835 1,319450 $ -1,042,404 -436,954 -106,133 -29,099 66,869 -467,682 -175,727 -413,448 -243,394 1,024 7,638 -175 861 -3,015,171 $ 2,423,452 926,765 14,614 668,836 41,660 335,840 $ 4,411,167 $ 1,395,996 14,719,085 $ ====16..,1=1=5=,0=81= -5- SEMINOLE 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 Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 1.315,464 $ 1,390,775 $ 1,074,095 73,975 921,179 629,090 6,417 27,142 246,754 227,543 5,000 2,706,239 1,074,095 320,729 921,179 856,633 11,417 27,142 $ 4,047,362 $ 1,870,072 $ ====5,!,;9=1=7'-=4=34= $ 653,708 $ 1,137,957 $ 1,791,665 $ 71,718 $ 137,854 86,852 296,424 $ 725,426 1,137,957 137,854 86,852 2,088,089 $ 308,824 $ 27,142 $ 1,573,648 1,919,731 $ 2,255,697 $ 1,573,648 $ 308,824 27,142 1,573,648 1,919,731 3,829,345 $ 4,047,362 $ 1,870,072 $ ======5=1.,9=1=7'"=,4=34= The notes to the basic financial statements are an integral part of this statement. -6- SEMINOLE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2004 EXHIBIT "D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures. $ 3,829,345 $ 310,550 1,460,617 962,528 9,821,359 1,790,953 -2,008,543 12,337,464 -51 728 Net Assets of Governmental Activities (Exhibit "A") $ ==16=,1=1=5=,0=8=1 The notes to the basic financial statements are an integral part of this statement. -7- SEMINOLE 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 Other Support Services Food Services Operation Capital Outlay 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 TOTAL $ 2,642,037 $ 14,614 $ 926,765 8,208,638 237,113 2,931,547 1,010,135 37,762 22,306 19,354 303,647 33,396 $ 14,160,551 $ 2,226,763 $ 2,642,037 941,379 8,445,751 3,941,682 37,762 41,660 337,043 16,387,314 $ 8,792,113 $ 508,002 677,573 186,108 341,213 $ 784,116 170,642 873,027 657,144 63,363 1,042,378 1,762 2,378,651 $ 14,095,679 $ 2,380,413 $ $ 64,872 $ -153,650 $ 8,792,113 508,002 677,573 186,108 342,975 784,116 170,642 873,027 657,144 63,363 1,042,378 2,378,651 16,476,092 -88,778 $ 65,460 $ $ -65,460 $ 65 460 $ -65,460 $ $ 130,332 $ -219,110 $ 2,125,365 1,792,758 65,460 -65,460 0 -88,778 3,918,123 Fund Balances - Ending $ 2,255,697 $ 1,573,648 $ =:=,;3;,:,;,8;;;2;,;9.,;;,3;,;,45~ The notes to the basic financial statements are an integral part of this statement. -8- SEMINOLE 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. In the Statement of Activities, only the gain on the sale of the equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the equipment sold. $ 1,910,325 -205,763 -88,778 1,704,562 -218,585 -1,203 Change in Net Assets of Governmental Activities (Exhibit "B") $ ====1l=,3=95:!:,9=9=6 The notes to the basic financial statements are an integral part of this statement. -9- SEMINOLE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ======3=6=,0=2=8= $ ===3==6,=02=8= The notes to the basic financial statements are an integral part of this statement. - 10 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Seminole 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 Seminole 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. - 11 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including grants from the Georgia Department of Education, Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen 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. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. - 12 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District 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 of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and - 13 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (8) Obligations of other political subdivisions ofthe 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 Seminole County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 16, 2003 (levy date). Taxes were due on December 31, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The Seminole County Tax Commissioner bills and collects the property taxes for the School District and remits 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 $2,642,037. The tax millage rate levied for the 2003 tax year (calendar year) for the Seminole County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 13.84 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $926,765 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. - 14 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time 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 $ 0 NIA $ 100,000 20 to 80 years $ 100,000 50 to 80 years $ 5,000 5 to 50 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. 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 ofthe following: - 15 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 3: DEPOSITS (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 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, 2004, the bank balances were $4,242,791. The amounts of the total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2004, as follows: - 16 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 3: DEPOSITS Risk Category Bank Balance 1 $ 300,000 2 2,014,447 3 1,928,344 Total $ 4,242,791 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 Decreases Balances June 30, 2004 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 310,550 $ 310,550 308 799 $ 1,404,135 $ 252,317 1,460,617 Total Capital Assets Not Being Depreciated $ 619 349 $ 1,404,135 $ 252,317 $ 1,771,167 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 9,821,359 1,518,600 $ 488,411 284,390 $ 474,117 $ 12,037 9,821,359 1,790,953 962,528 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 1,314,808 397,399 101 407 123,704 59,642 22 417 10,834 1,438,512 446,207 123,824 Total Capital Assets, Being Depreciated, Net $ 10,014,756 $ 552,744 $ 1203 $ 10,566,297 Governmental Activity Capital Assets - Net $ 10,634.105 $ 1,956.879 $ 253.520 $ 12,337.464 Current year depreciation expense by function is as follows: - 17 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 5: CAPITAL ASSETS Instruction Support Services Pupil Services School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 133,256 $ 11,133 500 2,420 1,599 43,261 58,913 13,594 Note 6: RESTRICTED ASSETS $=~2~05~,7~6~3 Special Purpose Local Option Sales Tax (SPLOST) funds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable statutory provisions. Restricted assets at June 30, 2004, were as follows: District-wide Capital Projects SPLOST Restricted Cash and Cash Equivalents: Capital Acquisitions $ 1,390,775 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 General Fund $.===65=.4=='6==0 Transfers are used to reimburse the General Fund for prior year capital expenditures which were reimbursed by Georgia State Financing and Investment Commission (GSFIC). - 18 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets and errors or omissions. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability 2003 2004 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1 030 $ 1 030 $ 0 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Each Principal Finance Director Each Lunchroom Supervisor $ 100,000 $ 5,000 $ 5,000 $ 5,000 - 19 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 9: OPERATING LEASES Seminole County Board of Education has entered into various leases as lessee for copy machines. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2004, for governmental funds amounted to $13,145. The School District terminated all operating leases in fiscal year 2004. Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $129,705 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 $128,609 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 $1,096 Note 11: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2004, together with funding available: Project Unearned Executed Contracts Funding Available From Federal Agricultural Barn Bus Shop 04/FED-725-058 $ 28,005 5,233 549 935 $_~5~52=,8~6~5 $ 583,173 $_=====5==52-,8==6==5 The amounts described in this note are not reflected in the basic financial statements. Note 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. - 20 - SEMINOLE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" 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 2004 2003 2002 100% 100% 100% $ 719,664 $ 711,210 $ 687,149 - 21 - SEMINOLE 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 Other Support Services Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 2,593,273 $ 2,653,273 $ 2,642,037 14,614 8,364,826 8,083,755 8,208,638 2,711,405 2,867,023 2,931,547 112,000 112,000 37,762 27,900 21,900 22,306 13,200 17,010 303,647 $ 13,822,604 $ 13,754 961 $ 14,160,551 $ 8,943,940 $ 8,892,359 $ 8,792,113 338,842 674,349 200,821 356,999 798,645 160,167 799,376 566,672 77,923 922,722 369,903 677,734 195,285 374,724 750,655 167,291 846,353 537,240 83,374 922,722 508,002 677,573 186,108 341,213 784,116 170,642 873,027 657,144 63,363 1,042,378 $ 13,840,456 $ 13 817,640 $ 14,095,679 $ -17,852 $ -62,679 $ 64,872 $ 10,203 $ 19,580 $ 65,460 -10,203 -19,580 $ 0 $ 0 $ 65,460 $ -17,852 $ -62,679 $ 130,332 2,221,130 2,221,130 2,125,365 282,488 282,488 Fund Balances - Ending $ 2,485,766 $ 2,440,939 $===2=-,2=5=5-=,6=97== 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. - 23 - SEMINOLE 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 Education, U S Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Innovative Education Program Strategies Reading Excellence - Local Reading Improvement Rural Education School Renovation - Schools Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Marion County Board of Education d/b/a Two Rivers Migrant Education Agency Migrant Education Total U S Department of Education Labor, U S Department of Pass-Through From Georgia Department of Education School to Work Initiative CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 10.550 N/A (2) NIA $ _ _ _--"9_2_4,~8-=-65~ $ 924,865 N/A 62 236 $ _ _ _--"9-"8-'--7'-'-1-=-0-'--1 84.027 84.173 84.318 84.367 84.298 84.338 84.358 84.352 84.010 84.048 84.011 17.249 N/A $ N/A $ N/A N/A N/A N/A N/A N/A N/A N/A N/A $ N/A $ 199,934 15 500 215,434 21,283 197,804 11,684 413,269 44,366 1,062,700 732,193 29,761 95,483 2,823 977 57 500 Total Federal Financial Assistance $ N/A = Not Available 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 ($247,223) 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 Seminole 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. 3 868,578 See notes to the basic financial statements. - 24 - SEMINOLE 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 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 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 Next Generation Schools Preschool Handicapped Program Special Education Low Incidence Grant Lottery Program Student Information Systems Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACT Bainbridge College Student Tutor Program GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 266,458 $ 266,458 311,774 174,161 1,065,372 131,269 565,750 109,137 897,181 768,140 269,165 898,445 5,131 13,034 10,351 9,685 42,682 49,835 75,622 154,037 49,291 29,889 323,729 299,036 444,580 303,974 72,202 19,500 49,605 6,144 9,008 8,559 664,459 54,358 112,644 -360,435 14,066 25,524 128,609 5,997 18,711 45,069 61,439 $ 1,096 4 355 237,113 311,774 174,161 1,065,372 131,269 565,750 109,137 897,181 768,140 269,165 898,445 5,131 13,034 10,351 9,685 42,682 49,835 75,622 154,037 49,291 29,889 323,729 299,036 444,580 303,974 72,202 19,500 49,605 6,144 9,008 8,559 664,459 54,358 112,644 -360,435 14,066 25,524 128,609 5,997 18,711 45,069 61,439 237,113 1,096 4 355 See notes to the basic financial statements. $ 8 208 638 $ 237,113 $ 8,445 751 - 25- SEMINOLE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2004 SCHEDULE "4" PROJECT Reroofing, remodeling and renovating existing classrooms, instructional and support space at the elementary school and auditorium, the Malcolm gymnasium and the existing football stadium; renovation, paving, fencing and other development of parking areas, bus loading zones and grounds at the elementary and middle/high school; demolition of old primary school buildings; purchase school buses, copy machines, computer equipment, lighting, surveillance equipment, desks, tables, lockers and other necessary furniture, equipment and personal property and to construct new classrooms, instructional and support space. Adding to, renovating, repairing, improving and equipping existing school buildings or other buildings or facilities useful or desirable in connection therewith; acquiring new school equipment, including new school buses; acquiring, constructing and equipping new buildings or facilities useful or desirable in connection therewith, including a new bus shop; acquiring any property necessary or desirable thereof, both real and personal. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS(3) PROJECT STATUS $ 3,200,000 $ 3,390,000 $ 317,200 $ 3,063,568 Ongoing 4,500,000 4,500,000 608,154 214,825 Ongoing $ 7,700,000 $ 7,890,000 $ ===9=25==,3=5=4=$ 3,278,393 (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 Seminole 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. - 26 - SEMINOLE 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 High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Gifted Student - Category VI Remedial Education Program Alternative Education Program 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 $ 367,647 $ 367,881 $ 16,690 $ 384,571 199,272 238,871 2,259 241,130 1,207,158 846,159 58,138 904,297 165,950 436,356 3,526 439,882 641,010 488,101 28,055 516,156 122,769 1,020,220 870,655 306,346 1,010,671 46,794 59,633 85664 268,156 1,050,918 1,313,337 244,019 853,391 58,119 76,368 103,699 1,211 58,178 43,769 28,613 41,542 1,147 1,055 391 269,367 1,109,096 1,357,106 272,632 894,933 59,266 77,423 104 090 $ 6,103,789 $ 6,345,375 $ 284,574 $ 6,629,949 174,496 33,698 162,984 13,482 23,931 20,398 186,915 33 880 TOTAL QBE FORMULA FUNDS $ 6,311,983 $ 6,521,841 $ 328,903 $ ==,,,:6;;,i,8~5;,;0.,:,7~44,;,, (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. -27 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 February 23, 2005 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education and Superintendent and Members of the Seminole County Board of Education REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Seminole County Board ofEducation as ofand for the year ended June 30, 2004, which collectively comprise Seminole County Board of Education's basic financial statements and have issued our report thereon dated February 23, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Seminole 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. 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 Seminole 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-7251-04-01. 2004YB-30 A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Seminole County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Seminole County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2004YB-30 State Auditor Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 February 23, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Seminole 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 Seminole County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to its major Federal program for the year ended June 30, 2004. Seminole County Board of Education's major Federal program is identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to its major Federal program is the responsibility ofSeminole County Board ofEducation's management. Our responsibility is to express an opinion on Seminole 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 Seminole 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 Seminole County Board ofEducation's compliance with those requirements. 2004SA-10 In our opinion, the Seminole County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to its major Federal program for the year ended June 30, 2004. Internal Control Over Compliance The management of Seminole 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 Seminole 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 Seminole 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, tte~l~~to~~ State Auditor RWH:gp 2004SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SEMINOLE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7251-03-01 Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7251-03-01 Corrective action will be fully implemented in fiscal year 2005. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-7251-02-01 FA-7251-03-01 Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Finding Control Number: FA-7251-03-01 The Seminole County Board of Education complied with all of the guidelines/ requirements that was set forth by the Georgia Department ofEducation during fiscal year 2003. In July 2004, the State provided guidance on how the LEA should implement funding and operational procedures to remove fiscal and accounting barriers under the current accounting system ofGeorgia. The new process will be fully implemented in fiscal year 2005. SECTION IV FINDINGS AND QUESTIONED COSTS SEMINOLE 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 Seminole 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 Seminole 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 Seminole 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 Seminole 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 Seminole 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 Seminole 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: 84.352 School Renovation - Schools 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Seminole County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. - 1- SEMINOLE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7251-04-01 Our examination ofprincipal accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping functions. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Expenditures/Liabilities/Disbursements Three of fifteen items tested did not have supporting documentation for the amounts paid. 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 of custody and record keeping be segregated. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -2- SECTIONV MANAGEMENT'S RESPONSES SEMINOLE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FS-7251-04-01 Corrective action will be fully implemented in fiscal year 2005. The Board of Education and the principal altered financial duties of school office staff to properly segregate custody and record keeping as well as maintain accurate documentation. Contact Person: Sherry Gray Phone: (229) 524-2433 ext. 24 Fax Number: (229) 524-2212 E-mail Address: sgray@doe.kl2.ga.us