THOMAS COUNTY BOARD OF EDUCATION THOMASVILLE, 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 THOMAS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 10 H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 I NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 29 THOMAS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 30 3 SCHEDULE OF STATE REVENUE 32 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 34 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 35 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON 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 FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION IV 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 March 23, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Thomas County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Thomas 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 Thomas 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 opm10ns. 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 ofthe Thomas County Board ofEducation, as ofJune 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2004ARL-11 In accordance with Government Auditing Standards, we have also issued our report dated March 23, 2005, on our consideration of the Thomas County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through x and page 29 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Thomas County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24. Respectfully submitted, RWH:as 2004ARL-l l Russell W. Hinton State Auditor THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 The discussion and analysis ofThomas County Board ofEducation's :financial performance provides an overall review of the Board's :financial activities for the fiscal year ended June 30, 2004. The intent of this discussion and analysis is to look at the Board's :financial performance as a whole. Readers should also review the :financial statements and the notes to the basic :financial statements to enhance their understanding of the Board's :financial performance. Financial Highlights Key :financial highlights for 2004 are as follows: On the District-wide :financial statements, the assets ofthe Board exceeded liabilities by $29.6 million, an increase of $4.1 million over fiscal year 2003. Ofthe $29.6 million, $2.9 million is unrestricted and is available for spending at the School Board's discretion. 0 The Board had $42 million in expenses relating to governmental activities; only $31.4 million ofthese expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of$14.7 million were adequate to provide for these programs. As stated above, general revenues accounted for $14.7 million or 32% of all revenues totaling $46.1 million. Program specific revenues in the form of charges for services, grants and contributions accounted for $31 .4, or 68% of total revenues. Among major funds, the General Fund had $42.2 million in revenue and $41 million in expenditures. The General Fund's balance increased to $5.9 million from $4.9 million. 0 Due to the :financial condition of the State of Georgia, our state funding was reduced by an additional $0.5 million after the start of the fiscal year. This was added to the recurring reduction of $0.5 million that began in fiscal year 2003. Using the Basic Financial Statements This annual report consists of a series of :financial statements and notes to those statements. These statements are organized so the reader can understand the Thomas County Board of Education as a :financial whole, or as an entire operating entity. The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view ofthe Board's :finances and a longer-term view of those :finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were :financed in the short-term as well as what remains for future spending. The fund :financial statements also look at the Board's most significant funds. In the case of the Thomas County Board of Education, the General Fund is by far the most significant fund. - 1- THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Reporting the Board as a Whole Statement ofNet Assets and the Statement ofActivities While this document contains the large number offunds used by the Board to provide programs and activities for the schools, the view ofthe Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2004?" The Statement ofNet Assets and the Statement ofActivities answers this question. These statements include all assets and liabilities using the economic resources focus and accrual basis ofaccounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when the cash is received or paid. These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the Board as a whole, thefinancial position of the Board has improved or diminished. The causes ofthis change may be the result ofmany factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors. In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity: Governmental Activities - All ofthe Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, student activity accounts and various others. Reporting the Board's Most Significant Funds Fund Financial Statements Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund, Capital Projects Fund, and the Debt Service Fund. Governmental Funds Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out ofthose funds and the balances left at year-end available for spending in future periods. These funds are reported using the current financial resources measurement focus and the modified accrual accounting method, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps determine whether there is adequate financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. - 11 - THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Fiduciary Funds The Board is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The Board is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The Board excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. The Board as a Whole The perspective of the statement of net assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2004, and the comparative amounts for fiscal year 2003. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2004 Year 2003 Assets Current and Other Assets Capital Assets, Net $ 31,573,045 24,674,498 $ 33,030,858 19,754,403 Total Assets $ 56,247,543 $ 52,785,261 Liabilities Current and Other Liabilities Long-Term Liabilities $ 7,547,774 19,125,177 $ 5,444,561 21,902,971 Total Liabilities $ 26,672,951 $ 27,347,532 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 22,924,905 3,795,931 2,853,756 $ 18,596,496 3,642,236 3,198,997 Total Net Assets $ 29,574.592 $25,437,729 Total net assets increased by $4.1 million in fiscal year 2004. Capital Assets increase by $4.9 million in fiscal year 2004, primarily due to construction in progress for the Board's two newest schools. Table 2 shows the changes in net assets for fiscal year 2004 compared to changes in net assets for fiscal year 2003. - 111 - THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Fiscal Year 2004 Year 2003 $ 1,152,083 30,105,751 147,904 $ 875,335 30,915,447 Total Program Revenues $31,405,738 $ 31,790,782 General Revenues: Taxes Property Taxes Sales Taxes Special Purpose Local Option Sales Tax For Debt Service and Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Loss on Donation of Land $ 6,817,087 3,899,638 177,109 36,632 2,466,122 354,942 998,209 -21,199 $ 6,784,377 1,753,867 196,012 30,522 2,052,783 342,318 1,051,546 Total General Revenues and Special Items $ 14,728,540 $ 12,211,425 Total Revenues $46,134,278 $44,002,207 Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $28,050,647 2,103,194 858,368 591,612 535,667 2,239,759 254,295 1,682,951 1,841,421 264,525 196,857 299,076 2,472,625 606,418 $ 28,096,634 2,193,068 755,001 526,053 463,613 2,354,225 239,824 2,449,707 1,667,708 209,128 202,695 317,027 2,311,922 106,805 Total Expenses $ 41,997,415 $ 41,893,410 Increase in Net Assets $ 4,136,863 $ 2,108.797 - lV - THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Figure A shows the funding sources for the revenues. State grants comprise 59 percent of the Board's revenues. Property Taxes make up 15 percent of the total funding, while an additional 12 percent is received from Federal sources. Figure A Sources of Revenue for Fiscal Year 2004 Sales Taxes Other 9% ~ ~ 3 %/ Charges ~,or Ser\Aces 2% Federal Funds 12% Property Taxes 15% State Funds 59% As shown in Figure B, Instruction comprised 66.9 percent ofgovernmental program expenses, while eight other areas comprise the other 33.1 percent of expenditures for fiscal year 2004. Administration and Other Services (5.1 percent) consist of the central office, business and warehouse, athletics and other operations of the School District. 4.4% Student Transportation Figure B Functional Expenses for Fiscal Vear 2004 5.1% Administration & Other Services 2.0% Improvement of Instruction 1.4% Educational Media 5.9% Food Services 5.3% School Administration 4.0% Maintenance & Operation 66.9% Instruction -V- THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost ofservices and the net cost of services. In other words, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2004 Year 2003 Net Cost of Services Fiscal Fiscal Year 2004 Year 2003 Instruction 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 Food Services Interest on Short-Term and Long-Term Debt $ 28,050,647 $ 28,096,634 $ 2,103,194 858,368 591,612 535,667 2,239,759 254,295 1,682,951 1,841,421 264,525 196,857 2,193,068 755,001 526,053 463,613 2,354,225 239,824 2,449,707 1,667,708 209,128 202,695 299,076 2,472,625 606,418 317,027 2,311,922 106,805 6,577,041 $ 1,089,911 284,304 127,058 -379,955 1,167,572 254,295 184,836 768,828 260,998 -18,537 -328,050 -3,042 606,418 5,836,222 1,075,476 241,434 3,691 -440,913 1,134,746 239,824 952,955 589,089 204,138 -15,169 -53,453 227,783 106,805 Total Expenses $41,997,415 $41,893,410 $ 10.591 677 $ 10.102.628 Although program revenues make up a majority ofthe funding, the Board is still dependent upon tax revenues for governmental activities. Over 23 .4 percent of instruction activities are supported through taxes and other general revenues, and for all governmental activities general revenue support is 25 .2 percent. The Board's Funds The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $46.6 million and expenditures and other financing uses of $50 million. There was a decrease in the fund balance totaling $3 .4 million for the governmental funds as a whole, primarily from the start ofconstruction of two new schools in fiscal year 2004. The General Fund had an increase of $0.9 million, the Capital Projects Fund had a decrease of $4.7 million due to the start of construction mentioned above, and the Debt Service Fund had an increase of $0.4 million. The positive change in the fund balance ofthe general fund for the year, excluding the effect ofnew Long-Term debt, reflects that the Board was able to adequately meet current costs. - Vl - THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 General Fund Budgeting Highlights The Board's budget is prepared in accordance with Georgia law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2004, the Board amended its General Fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management. For the General Fund, the final budgeted revenues and other financing sources of $40.9 million exceeded the original budgeted amount of$39.9 million by $1 million. This difference was due to increases in property taxes, state funds, Federal funds and miscellaneous revenues. The actual revenues and other financing sources of $42.2 million exceeded the budgeted amount by $1.3 million. The final budgeted expenditures and other financing uses of $40.7 million exceeded the original budgeted amount of$40.6 million by $0.1 million. The actual expenditures and other financing uses of $41.3 million was $0.6 million more than budgeted. General Fund revenues and other financing sources exceeded expenditures and other financing uses by $1 million. This was a significant achievement considering the State reduced funding for the Board by $0.5 million after the original budget had been adopted. Capital Assets and Debt Administration Capital Assets At the end of fiscal year 2004 the Board had $24.7 million invested in capital assets, net of depreciation, all in governmental activities. Table 4 shows fiscal year 2004 balances and comparative 2003 amounts. Ofthe $4.9 million increase in capital assets, $4.6 million resulted from construction in progress on the Board's two new schools. The other $0.3 million represents major renovations to two other schools. - vu - THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2004 Year 2003 Land Construction in Progress Buildings and Improvements Equipment Land Improvements $ 1,340,624 4,843,202 15,714,032 2,003,985 772,655 $ 1,361,823 211,520 15,388,062 2,189,027 603,971 Total $ 24.674.498 $ 19,754.403 The Board has budgeted additional construction costs of$21.4 million for fiscal years 2005 and 2006 to complete the new Thomas County Middle School and new Hand in Hand Primary School. Debt At June 30, 2004, the Board had $12.2 million in bonds outstanding with $2.9 million ofprincipal due within one year, and $6.7 million in capital leases outstanding with $0.3 million ofprincipal due within one year. The capital leases are intergovernmental contracts with the South Georgia Governmental Services Authority. Long-Term debt decreased by $2.8 million over the prior fiscal year. Table 5 summarizes the Long-Term debt outstanding at June 30, 2004, with comparative amounts for fiscal year 2003. Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2004 Year 2003 General Obligation Bonds Capital Leases Compensated Absences $ 12,215,000 6,715,000 195,177 $ 15,000,000 6,715,000 187,971 Total $ 19,125.177 $ 21,902.971 - vm - THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 At June 30, 2004, the Board's overall legal bonding authority was $58 million based on the assessed value of taxable property as of January 1, 2004, with bonds and capital leases outstanding of $18.9 million. The Board has a legal debt margin of $39.1 million at June 30, 2004. The Board's bonds have assigned ratings of "AA" by Standards and Poor's based on the Boards participation in the Georgia state intercept program. Standard and Poor's assigned an underlying rating of "A" for the School District Bonds. The State of Georgia limits the amount available to be spent each year on multiyear leases, purchase, or lease purchase contracts to 7.5 percent of the locally generated taxes for the maintenance and operation of the school system. Both the current year payments and subsequently scheduled payments are below the 7.5 percent threshold of $761,898. Current Issues The Thomas County School System consists of6 campuses located in Thomas County, which had an estimated population of 43,667 in 2003, compared to 42,737 in 2000. The University of Georgia estimates the County's population to grow to 46,233 in 2010, an increase ofonly 6%. This indicates that the County has a stable population growth, much lower than the state as a whole. Historically, the County grew 12.2% during the 20 year period form 1980 to 2000, compared to 49.9% for the state of Georgia during the same 20 year period. The County's 2000 population ranked 43rd in the state. Current student enrollment in the system is approximately 5,600 students in grades PK-12. Among Georgia's 179 school systems that levy ad valorem taxes, Thomas County's 2004 millage rate of 12.271 is near the state average. The School Board's Education Local Option Sales Tax (ELOST) began January 1, 2003. For calendar year 2004, the average monthly tax collection was $338,381, a significant increase over the average for calendar year 2003 of $246,990. This indicates a steady growth in the County's retail sales establishments. Thomas County's largest employer is Archbold Memorial Hospital, with 1,600 employees. The Thomas County Board of Education is the second largest employer with approximately 800 employees. The largest private employer is Flowers Foods, with employment ofapproximately 500. The population growth ofThomas County is somewhat limited by the existence ofmany plantations in the county. Much ofthe land in the southern part ofThomas County, which borders Florida and is in close proximity to Tallahassee, is undeveloped timber land. In fact, six of the County's largest taxpayers are plantation owners. Also, in 1997, 53% ofall land in Thomas County was classified as forest land, according to the University of Georgia. Thomas County has one large municipality and six small communities. The County seat is Thomasville, which had an estimated population of 18,233 in 2003. The County also includes the communities ofBarwick, Boston, Coolidge, Meigs, Ochlocknee, and Pavo, with populations ranging from 334 to 1,432. Unincorporated Thomas County represented 48% ofthe County's total estimated population in 2003. - lX - THOMAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 The median household income as of 2002 was $43,100 per year. As of 2002, the per capita income was $25,896, ranking 23rd out of 159 counties in Georgia. In addition, this ranks in the 85th percentile in the U.S. A major reason for this high per capital income is due to the large medical community in Thomasville. According to the University of Georgia, as of2002 Thomas County had 140 physicians, which ranks 5th in Georgia in physicians rate per county resident. Unemployment for Thomas County remains relatively low. For 2003, Thomas County had an unemployment rate of3.8%, compared to 4.7% for Georgia as a whole, and 6.0% for the entire U.S. The biggest current issue facing the Board is a continued reduction in state funding due to lack of growth in state revenues. In the current fiscal year 2004, the year began with the Board's state revenue being reduced by $574,000. During the year another state revenue cut of $460,000 was made. By fiscal year 2005, the cumulative recurring revenue reduction has reached $1.2 million. As of this writing, the State plans to keep this reduction intact for fiscal year 2006. As mentioned earlier, the Board began construction in fiscal year 2004 on two new schools. Thomas County Middle School will house the 5th, 6th ,7th and 8th grade when completed and will replace Central Middle School. Hand in Hand Primary School will be home to kindergarten, prekindergarten and the child development center. This school will replace Hand in Hand School. Construction is expected to be completed for both schools by July 1, 2005. Total construction costs are budgeted to be $26 million for both schools. Contacting the Board's Financial Management This financial report is designed to provide our citizen's, taxpayers, investors and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Joey N. Holland, CPA, Finance Director at the Thomas County Board of Education, 11343 U. S. Highway 319 North, Thomasville, Georgia 31757. You may also email your questions to hollandj@rose.net. -X- THOMAS COUNTY BOARD OF EDUCATION THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2004 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Charter School Continuation of Federal Programs Debt Service Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 9,284,353 16,968,253 917,591 3,411,862 823,781 2,853 164,352 1,340,624 4,843,202 2,041,604 23,844,347 4,920,092 -12,315,371 $ ===5=6=,2=4:::::!7'=54=3= $ 1,870,934 3,563,735 1,773,135 339,970 3,243,822 15,881,355 $ 26,672,951 $ 22,924,905 94,667 323,780 1,218,386 2,159,098 2,853,756 $ 29,574,592 $ ===5=6=,2=4:::::!7'=54=3= The notes to the basic financial statements are an integral part of this statement. -3- THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 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 Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Loss on Donation of Land Total General Revenues and Special Items Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 28,050,647 $ 2,103,194 858,368 591,612 535,667 2,239,759 254,295 1,682,951 1,841,421 264,525 196,857 299,076 2,472,625 606,418 $ 41!9971415 $ 31,275 627,126 493,682 1 ! 1521083 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 $ 21,442,331 1,013,283 574,064 464,554 915,622 1,072,187 1,498,115 924,689 $ 3,527 215,394 1,981,985 $ 30,105 751 $ $ 147,904 147 904 $ -6,577,041 -1,089,911 -284,304 -127,058 379,955 -1, 167,572 -254,295 -184,836 -768,828 -260,998 18,537 328,050 3,042 -606,418 -10,591,677 $ 6,794,883 22,204 3,549,638 350,000 177,109 36,632 2,466,122 354,942 998,209 -21,199 $ 14,728,540 $ 4,136,863 25,437,729 $ ===29=,5=7=4=,5=92= -5- THOMAS 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 GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 6,535,575 $ 1,347,782 $ 1,400,996 $ 16,876,096 92,157 368,246 3,411,862 823,781 2,853 1641352 665,945 9,284,353 16,968,253 1,034,191 3,411,862 823,781 2,853 164 352 Total Assets $ 111306,669 $ 18,223,878 $ 2,159,098 $ ===3=1:::!:::,6:::::::8::::::,9'=64=5= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable $ 1,833,508 $ 37,426 $ 3,563,735 1,773,135 3391970 Total Liabilities $ 5,397,243 $ 2,150,531 $ FUND BALANCES Reserved for: Bus Replacement Charter School Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Capital Projects $ 94,667 $ 323,780 1,120,578 $ 2,159,098 164,352 $ 15,649,705 406,087 3,799,962 423,642 Total Fund Balances $ 5,909,426 $ 16,073,347 $ 211591098 $ 1,870,934 3,563,735 1,773,135 339,970 7 547 774 94,667 323,780 1,120,578 2,159,098 164,352 15,649,705 406,087 3,799,962 4231642 24 141 871 Total Liabilities and Fund Balances $ 11,306,669 $ 18,223,878 $ 2,159,098 $ ===3=1=,6=8=9'=64=5= The notes to the basic financial statements are an integral part of this statement. -6 - THOMAS 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. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Compensated Absences Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 24,141,871 $ 1,340,624 4,843,202 2,041,604 23,844,347 4,920,092 -12,315,371 24,674,498 -116,600 $ -12,215,000 -6,715,000 -195,177 -19,125,177 $ 29,574,592 The notes to the basic financial statements are an integral part of this statement. -7- THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2004 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES} Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 7,005,098 213,741 $ 27,293,535 5,426,242 1,152,083 114,400 1,023,411 $ 42,228,510 $ 350,000 $ $ 3,549,638 221,023 2,551 19,519 573,574 $ 3,569,157 $ 7,005,098 4,113,379 27,293,535 5,426,242 1,152,083 354,942 1,025,962 46,371,241 $ 27,257,045 $ 2,016,637 851,229 554,252 538,209 2,208,767 255,902 2,743,463 1,463,416 207,073 196,857 299,076 2,450,148 $ 5,310,764 $ 2,785,000 606,418 $ 41,042,074 $ 5,310,764 $ 3,391,418 $ $ 1,186,436 $ -4,737,190 $ 177 739 $ 27,257,045 2,016,637 851,229 554,252 538,209 2,208,767 255,902 2,743,463 1,463,416 207,073 196,857 299,076 2,450,148 5,310,764 2,785,000 606,418 49,744,256 -3,373,015 $ $ -228,835 45,465 $ 183,370 $ 228,835 -228,835 $ -228,835 $ 45,465 $ 183,370 $ 0 $ 957,601 $ -4,691,725 $ 361,109 $ -3,373,015 4,951,825 20,765,072 1,797,989 27,514,886 Fund Balances - Ending $ 5,909,426 $ 16,073,347 $ 2,159,098 $ ==2=4=1,=4=1,=87=1= The notes to the basic financial statements are an integral part of this statement. -8- THOMAS 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 $ 5,848,806 -879,759 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 loss on the sale of the land and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land and carrying value of the equipment sold. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Increase in Compensated Absences -3,373,015 4,969,047 -188,011 -48,952 2,785,000 -7 206 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==4,!::::::13=6=,8=6=3 The notes to the basic financial statements are an integral part of this statement. -9 - THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30 2004 EXHIBIT "G" ASSETS Cash and Cash Equivalents Investments Certificate of Deposit Accounts Receivable, Net Interest Total Assets LIABILITIES Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 5,657 $ 25,904 75,213 1 472 $ $ 25,904 $ _ _8_2.1.3__42_ $ 82,342 $ ===25='=90=4= The notes to the basic financial statements are an integral part of this statement. - 10 - THOMAS COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2004 EXHIBIT"H" ADDITIONS Contributions Donors Investment Earnings Interest Total Additions DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 5,600 1 974 $ 7,574 1,000 $ 6,574 75,768 $ ===82='=34=2= The notes to the basic financial statements are an integral part of this statement. - 11 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Thomas 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. Blended Component Unit The Bishop Hall Charter School, Incorporated (Charter School) is responsible for the public education of all students attending its school. The Charter School was created through a contract between the School District and the Charter School whereby all State funding associated with the students attending the Charter School and certain specified local funds are provided to cover the cost ofits operations. The financial statements ofthe Charter School have been blended with the School District's general fund. 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 Thomas 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. - 12 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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: 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 Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal and interest. The School District reports the following fiduciary fund types: Private Purpose Trust fund reports trust arrangements under which income is to be used to provide scholarship aid to defray college educational expenses. Agency funds account for assets held by the School District as an agent for various funds or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. - 13 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District 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 and compensated absences, which are recognized as expenditures to the extent they have matured. 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. The School District funds certain programs by a combination of specific 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, - 14 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables 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 Thomas County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on September 15, 2003 (levy date). Taxes were due on December 5, 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 Thomas 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, 2004, for maintenance and operations amounted to $6,982,894. The tax millage rate levied for the 2003 tax year (calendar year) for the Thomas County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 12.271 mills - 15 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,899,638 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 SUPPLIES INVENTORIES Inventories of consumable supplies are reported on the Combined Balance Sheet at average cost. The School District uses the consumption method to account for the inventories. The consumable supplies inventories are recorded as an asset when purchased and expenditures are recorded as the inventory items are used. FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (weighted average). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value 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: - 16 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment $ 5,000 NIA $ 5,000 20 years $ 5,000 50 years $ 5,000 10 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, - 17 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS (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, 2004, the bank balances were $14,857,380. The amounts ofthe total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2004, as follows: Risk Category 1 2 3 Total Bank Balance $ 1,882,690 12,900,779 73,911 $ 14,857.380 CATEGORIZATION OF INVESTMENTS Investments are classified as to risk by the three categories described below: Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name. - 18 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name. Category 3 - Uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent but not in the School District's name. Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool. At June 30, 2004, the carrying value of the School District's total investments was $12,829,646 which is materially the same as fair value. The investments are classified as to risk categories as follows: Ty:ge of Investment U. S. Government $ Local Government Investment Pools Total Investments Risk Categories 2 0 $ 0 $ Carrying Fair 3 Amount Value 92 157 $ 92,157 $ 93,000 12,737,489 12,737,489 $ 12 822 646 $ 12,830 489 The carrying amounts shown above includes amounts maintained in an investment pool by the State of Georgia, Office ofTreasury and Fiscal Services in which the School District owns no identifiable securities. The investment policy ofthe State of Georgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio and Extended Term Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission (SEC) as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. - 19 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years. 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 money market rated funds. The pool is not registered with the SEC as an investment company. The pool's primary objective is the prudent management ofpublic 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 of management fees) which are reinvested as shares in the pool on a monthly basis and determines participant's shares sold and redeemed based on the current share price, which at June 30, 2004, was at $1.99 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 on a daily basis. 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 of funds 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 of 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 duration at June 30, 2004, was 0.78 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, 2004, was 1.57 years. Investments in Fund 8 consist generally ofmortgage-backed securities issued by U.S. Corporations (reported as Corporate Obligations in the disclosure of custodial risk), 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 of investment advisory agreements executed between the Office of Treasury and Fiscal Services and the investment management firm. The agreement dir~cts 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 ofthe duration ofthe Index. The average investment duration for Fund 8 on June 30, 2004, was 1.55 years. In addition, the investment advisory agreements place limitations on individual security purchases and holdings as follows: - 20 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 1) Limits the duration of any security at the time ofpurchase to a maximum of five (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 1, 2003 Increases Decreases Balances June 30, 2004 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,361,823 $ 211,520 $ 4,631,682 21,199 $ 1,340,624 4,843,202 Total Capital Assets Not Being Depreciated $ 1,573,343 $ 4,631,682 $ 21,199 $ 6,183,826 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 23,053,563 $ 4,843,131 1,779,758 790,784 164,494 $ 261,846 $ 23,844,347 87,533 4,920,092 2,041,604 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 7,665,501 2,654,104 1,175,787 464,814 321,783 93,162 59,780 8,130,315 2,916,107 1,268,949 Total Capital Assets, Being Depreciated, Net $ 18,181,060 $ 337,365 $ 27,753 $ 18,490,672 Governmental Activity Capital Assets - Net $ 19,754.403 $ 4,969.047 $ 48.952 $ 24,674.498 Capital assets being acquired under capital leases as of June 30, 2004, are as follows: - 21 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 5: CAPITAL ASSETS Buildings Less: Accumulated Depreciation Governmental Funds $ 784,390 2,074 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services $ Improvements of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services $==7===8=2-==31====6 $ 48,850 4,029 21,085 5,412 17,491 2,302 7,303 252,190 32,424 $ 447,883 391,086 40,790 879.759 Note 6: RESTRICTED ASSETS 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, 2004, were as follows: Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions District-wide Capital Projects Bond Capital SPLOST Proceeds Leases Debt Service Funds $ 378,189 $ 86 $ $ 1,400,996 545,865 $ $ 11,822,267 $ 5,053,829 92,157 - 22 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2004, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects Debt Service Funds $ 45,465 183,370 Total $==2==28=::l!::.8==3==5 Transfers are used to move property tax revenues collected by the General Fund to (1) the Districtwide Capital Projects Fund as required match or supplemental funding source for capital construction projects, and, (2) to move funds to Debt Service Fund for payment on capital lease. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions,job related illness or injuries to employees and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. 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: 2003 2004 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 11,120 $ 11,120 $ 0 $ 0 $ 14,293 $ 14,293 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: - 23 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 8: RISK MANAGEMENT Position Covered Amount Superintendent All Other Employees (Per Loss) $ 100,000 $ 10,000 Note 9: LONG-TERM DEBT CAPITAL LEASES The Thomas County Board of Education has entered into various lease agreements including a Qualified Zone Academy Bond as lessee for the purpose of renovating, repairing and equipping several schools and related facilities in the School District. These lease agreements qualify as capital leases for accounting purposes. COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2002 2.0%-4.0% $ 12,215.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows: - 24 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 9: LONG-TERM DEBT Balance July 1, 2003 Additions Annual Leave Earned Deductions Annual Leave Utilized Debt Retired Balance June 30, 2004 Portion of Long-Term Debt Due within One Year Capital Leases Governmental Funds General Compensated Obligation Absences Bonds Total $ 6,715,000 $ 187,971 $ 15,000,000 $ 21,902,971 103,893 103,893 $ 6 715 QQQ $ 96,687 2,785,000 96,687 2,785,000 125 177 $ 12 215 QQQ $ 19 125 171 $ 280,000 $ 78,822 $ 2,885,000 $ 3,243,822 At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 Ca12ital Leases Principal Interest 2005 2006 2007 2008 2009 2010 - 2014 2015 - 2018 $ 280,000 $ 290,000 300,000 315,000 325,000 1,800,000 3,405,000 180,500 170,392 159,923 149,093 137,722 504,317 155,230 Total Principal and Interest $ 6,715.000 $ 1,457.177 Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2005 2006 2007 2008 $ 2,885,000 $ 2,990,000 3,105,000 3,235,000 417,850 331,300 241,600 123,150 Total Principal and Interest $ 12,215.000 $ 1,113.900 - 25 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 10: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2004, together with funding available: Project Unearned Executed Contracts Funding Available From State Hand in Hand Pre-K School Construction $ 5,250,616 Garrison-Pilcher Elementary School Renovations and Improvements 129,903 SA0l S-736-284 15,777,533 $ 2,741,256 $ 21~158~052 $ 2~741~256 The amounts described in this note are not reflected in the basic financial statements. Note 11: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 12: RELATED PARTY TRANSACTIONS The School District employed the services of Bannister Electric Company, Inc. for an emergency electrical repair project at Garrison-Pilcher School. The company is owned and operated by Johnny Bannister, who is currently the Vice-Chairman ofthe Thomas County Board ofEducation. Current year expenditures to Bannister Electric Company, Inc. totaled $42,391. 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 - 26 - THOMAS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 13: RETIREMENT PLANS 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% $ 2,180,696 $ 2,170,747 $ 2,063,144 - 27 - THOMAS COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30 2004 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations 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 Adjustment NONAPPROPRIATED BUDGETS ORIGINAL (1} FINAL (1} ACTUAL AMOUNTS $ 6,800,000 $ 6,940,103 $ 7,005,098 50,000 47,093 213,741 27,149,880 27,519,762 27,293,535 4,962,042 5,071,637 5,426,242 508,000 547,725 1,152,083 71,800 95,826 114,400 289,000 439 143 1 023 411 $ 39,830,722 $ 40,661,289 $ 42,228,510 $ 27,236,521 $ 27,086,356 $ 27,257,045 1,847,832 931,298 542,500 515,898 2,126,599 279,500 2,679,268 1,461,362 203,250 201,203 2,230,500 1,816,145 884,858 545,100 498,217 2,081,218 273,600 2,794,581 1,478,437 202,650 171,100 2,452,100 2,016,637 851,229 554,252 538,209 2,208,767 255,902 2,743,463 1,463,416 207,073 196,857 299,076 2 450 148 $ 40,255,731 $ 40,284,362 $ 41 042 074 $ -425 009 $ 376 927 $ 1,186,436 $ 50,000 $ 226,167 -333,370 -454 537 $ -228,835 $ -283 370 $ -228,370 $ -228,835 $ -708,379 $ 148,557 $ 957,601 4,867,631 4,867,631 4,951,825 14 202 14 202 Fund Balances - Ending $ 4 173 454 $ 5,030,390 $ 5,909,426 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. - 29 - THOMAS 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 Pass-Through From Georgia Department of Human Resources Special Education Grants to States Total Special Education Cluster Other Programs Pass-Through From Coastal Plains Regional Educational Service Agency d/b/a Southern Pines Migrant Education Agency Migrant Education Pass-Through From Georgia Department of Education Charter Schools Enhancing Education Through Technology Program Improving Teacher Quality State Grants Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Southwest Georgia Regional Educational Service Agency Safe and Drug-Free Schools and Communities Pass-Through From Southwest Georgia Technical College Tech-Prep Program Total U.S. Department of Education Defense, U.S. Department of Direct Department of the Air Force R.O.T.C. Program CFDA NUMBER PASS- THROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 N/A N/A $ $ (2) 2,089,621 2,089,621 10.550 N/A $ 205,721 2,295,342 84.027 84.173 84.027 N/A $ N/A N/A $ 1,317,248 57,587 246,030 1,620,865 84.011 84.282 84.318 84.367 84.358 84.298 84.010 84.048 84.186 84.243 N/A N/A N/A N/A N/A N/A NIA N/A N/A N/A $ 56,843 10,000 56,350 289,928 147,412 43,437 1,243,293 75,949 11,000 4,143 3,559,220 $ 39 843 Total Federal Financial Assistance N/A = Not Available $ ======5,=89=4=,4=0=5 - 30 - THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2004 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($492,465) 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 Thomas County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 31 - THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30 2004 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 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 CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements 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 Mentor Teachers National Teacher Certification Preschool Handicapped Program Severely Emotionally Disturbed Student Information System Lottery Program Student Information System - 32 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 1,024,905 1,526,506 91,130 2,640,693 674,676 1,344,000 428,216 -381 3,241,470 2,462,386 655,221 472,658 781,018 2,021,075 293,439 250,509 342,439 118,331 233,844 5,577 464,554 144,539 102,147 709,630 846,323 1,417,717 800,755 147,904 19,500 113,092 20,488 1,975 2,431,086 154,806 51,576 -1, 107,203 40,246 65,843 168 3,791 73,573 2,119,288 28,167 35,208 THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30 2004 AGENCY/FUNDING CONTRACT Governors Council on Developmental Disabilities Project WINS (Winning Ideas Network Schools) SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ _ _ _ _ _65_0_ $ ===2=7=,2=93='=53=5= See notes to the basic financial statements. - 33- THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30 2004 SCHEDULE "4" PROJECT To acquire land and contruct and equip a new Pre-K/Kindergarten School, a new middle school, and a new 9th Grade Academy; renovations and improvements to Garrison-Pilcher Elementary School, including roof, flooring, and restrooms, to include handicap access; renovations and improvements to Cross Creek Elementary School, including restrooms and entrances; renovations and improvements to Central Middle School, including the installation of new HVAC systems, installing rubber tile at classroom building entrances, carpeting, auditorium and gymnasium improvements, and restroom facilities; renovations and improvements to Thomas County Central High School, including metal lockers, renovations to restrooms and athletic facilities; renovations and improvements to Chappelle School, including science labs, interior painting, restrooms improvements, and the installation or replacement of HVAC systems; the acquisition and equipping of transportation and maintenance facilities, including the replacement of school buses and classroom furniture, additions to the maintenance shop and bus garage, resurfacing of parking areas and purchasing necessary related equipment; renovations and improvements to administrative offices; athletic facilities and equipment; and acquisition of classroom technology, including networking and administrative systems ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 22,400,000 $ 31,404,824 $ 5,917,182 $ 1,528,064 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 Thomas County approved the imposition of a 1% sales tax to fund the above project. 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. - 34 - THOMAS COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30 2004 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 1,656,842 $ 106,197 2,951,572 760,979 1,512,749 1,543,235 $ 257,266 2,987,081 773,780 1,814,652 485,540 3,583,883 2,753,191 730,743 4,198,930 374,486 3,378,182 3,650,355 622,993 131,567 639,775 2,733,347 65,692 390,361 130,674 259,779 7467 493,546 365,702 10,653 69,357 $ 8,040 213,581 11,136 133,614 1,880 285,264 207,948 20,789 752 5,644 142,061 1,011 4 3,949 2,254 18,530 557 1,612,592 265,306 3,200,662 784,916 1,948,266 376,366 3,663,446 3,858,303 643,782 132,319 645,419 2,875,408 66,703 4 497,495 2,254 384,232 11,210 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 19,528,907 $ 19,842,312 $ 1,126,371 $ 20,968,683 Media Center Program Staff and Professional Development 515,100 113 560 447,504 38,558 84,260 35,598 531,764 74,156 TOTAL QBE FORMULA FUNDS $ 20,157,567 $ 20,328,374 $ 1,246,229 $ =====2=1=,5=7=4=,6=03= (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 35 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 March 23, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Thomas 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 Thomas County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Thomas County Board of Education's basic financial statements and have issued our report thereon dated March 23, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Thomas 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 Thomas 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-7361-04-01. 2004YB-30 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. 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 Thomas 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 Thomas 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:as 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 March 23, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Thomas County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133 Ladies and Gentlemen: Compliance We have audited the compliance of Thomas County Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2004. Thomas 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 Thomas County Board of Education's management. Our responsibility is to express an opinion on Thomas County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States 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 Thomas 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 Thomas County Board of Education's compliance with those requirements. 2004SA-10 In our opinion, the Thomas County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2004. Internal Control Over Compliance The management of Thomas 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 Thomas 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 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 Thomas 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, ~~-~ Russell W. Hinton State Auditor RWH:as 2004SA-10 SECTION III FINDINGS AND QUESTIONED COSTS THOMAS 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 Thomas County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Thomas 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 Thomas 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 Thomas 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 Thomas County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .51 0{a) of 0MB Circular A-133 The Thomas County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. 7. Maj or Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Thomas County Board ofEducation qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. - 1- THOMAS 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-7361-04-01 Our examination of the principal's accounts disclosed weaknesses in internal control 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. Eleven of the 24 deposits selected for testing were not supported by a receipt. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Seven ofthe 28 vouchers selected for voucher testing were not supported by a purchase order or an mv01ce. Eight of the 25 vouchers selected for voucher testing could not be located. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions, at the school principal account sites, and failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that the key accounting functions ofcustody,_record keeping, and authorization be segregated. Additionally, controls should be revised and monitored to provide reasonable assurance that transactions are processed according to established procedures. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -2- SECTION IV MANAGEMENT'S RESPONSES THOMAS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FS-7361-04-01 We concur with this finding. However, state and local funding resources will not allow for the addition of administrative staff at the school level that is necessary to properly separate accounting functions to eliminate the internal control weakness. As to the lack of documentation for deposits and expenditures, procedures have been implemented in each school to ensure all deposits and disbursements are supported by proper documentation. Contact Person: Joey N. Holland, Finance Director Telephone: (229) 225-4380, Fax: (229) 225-5012 Email: hollandj@rose.net