TURNER COUNTY BOARD OF EDUCATION ASHBURN, 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 TURNER COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 10 H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 I NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 25 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 28 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 30 TURNER COUNTY BOARD OF EDUCATION -TABLE OF CONTENTS- SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS TURNER COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 March 29, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Turner 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 Turner 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 Turner County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Turner 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 The Turner County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated March 29, 2005, on our consideration ofthe Turner County Board ofEducation'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 ofour testing of internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Turner County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24. ~-~.:is. Respectfully submitted, Russell W. Hinton State Auditor RWH:as 2004ARL-11 TURNER COUNTY BOARD OF EDUCATION TURNER COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings and Improvements 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 Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit) Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 1,271,170 273,232 1,179,782 510,884 7,912 27,880 534,307 1,437,871 1,754,450 9,898,836 1,792,048 -3,920,993 $ ===1=4,..7=6=:!7=37=9= $ 351,387 1,326,557 273,449 124,815 480,000 1,555,000 $ 4,111,208 $ 9,863,626 308,719 113,495 651,313 10,564 -291,546 $ 10,656,171 $ ===1=4=7=6=7=3=79= The notes to the basic financial statements are an integral part of this statement. -3- TURNER 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 Community Services 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 Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Loss on Donation of Building 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 $ 10,468,988 638,636 396,617 195,203 480,427 650,615 157,890 852,109 578,711 7,500 466,496 249,128 35,497 821,817 $ 83 553 $ 16 083 187 $ 77,096 77 096 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 $ 8,617,870 $ 292,514 178,608 165,268 574,147 396,653 1,437 486,401 279,177 284,476 721,807 $ 11,998,358 $ 362,808 $ 92,540 27,682 98,132 55,942 3,219 20,714 661 037 $ -1,488,310 -253,582 -218,009 -29,935 121,402 -253,962 -156,453 -267,576 -243,592 -7,500 -182,020 -245,909 -35,497 -2,200 -83,553 -3,346,696 $ 2,006,091 11,471 184,151 700,000 8,952 631,904 20,145 577,966 -276,224 -31 258 $ 3,833198 $ 486,502 10,169,669 $ =====10,,.,6=5=6"=1=71= -5- TURNER COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2004 EXHIBIT"C" ASSETS Cash and Cash Equivalents Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 727,693 $ 285 1,038,375 282,410 7,912 27,880 46,732 $ 141,407 228,474 496,745 $ 154,568 1,271,170 154,853 1,179,782 510,884 7,912 27 880 Total Assets $ 2,084,555 $ 416,613 $ 651,313 $ ===3='=15=2=,4=81= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund {Deficit) Total Fund Balances $ 343,602 $ 1,326,557 $ 1,670,159 $ $ 308,719 85,615 27,880 $ -7 818 $ 414 396 $ 7,785 273,449 124,815 406 049 $ 10,564 10 564 $ $ $ $ 651,313 651,313 $ 351,387 1,326,557 273,449 124 815 2,076,208 308,719 85,615 651,313 27,880 10,564 -7 818 1,076,273 Total Liabilities and Fund Balances $ 2,084,555 $ 416,613 $ 651,313 $ ===3~,1=5=2==,4=81= The notes to the basic financial statements are an integral part of this statement. -6- TURNER 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 and Improvements 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 $ 1,076,273 $ 534,307 1,437,871 1,754,450 9,898,836 1,792,048 -3,920,993 11,496,519 118,379 -2,035,000 Net Assets of Governmental Activities (Exhibit "A") $ 10,656,171 The notes to the basic financial statements are an integral part of this statement. -7- TURNER 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 Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 2,048,364 8,952 $ 9,401,701 3,284,503 77,096 8,734 577,366 700,000 $ 322,021 283,074 3,527 600 $ 15,406,716 $ 1,309,222 $ $ 184,151 7,884 192,035 $ 2,048,364 893,103 9,723,722 3,567,577 77,096 20,145 577 966 16,907,973 $ 10,266,001 $ 627,341 356,137 195,203 463,819 $ 1,120 650,615 157,335 $ 555 797,206 439,075 134,294 7,500 466,496 247,327 35,497 810,228 7,785 1,650,377 465,000 83,553 $ 15,527,565 $ 1,785,791 $ 549,108 $ $ -120,849 $ -476,569 $ -357,073 $ 535,245 487,133 1,008,386 10,266,001 627,341 356,137 195,203 464,939 650,615 157,890 797,206 573,369 7,500 466,496 247,327 35,497 810,228 1,658,162 465,000 83,553 17,862,464 -954,491 2,030,764 $ 414 396 $ 10,564 $ 651,313 $ ====-1,,;;;07=6,!;;12=73= The notes to the basic financial statements are an integral part of this statement. -8- TURNER 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 $ 1,686,575 -372,298 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, the loss on the donation of the land and building is reported; whereas, the Governmental Funds did not recognize any activity from the donation since there was no monetary exchange involved. Thus, the change in net assets differs from the changes in fund balance by the cost of the land and the carrying value of the building involved. 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 -954,491 1,314,277 -30,802 -307,482 465,000 Change in Net Assets of Governmental Activities (Exhibit "8") $ ===4=8=6=,5=02= The notes to the basic financial statements are an integral part of this statement. -9 - TURNER 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 Other Total Assets LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Funds Held for Others Total Liabilities NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 625 25.000 - - - - - $ _ _-"-9=2,"-13"-'5'-- $ 25,625 $ 92,135 $ 37,053 2,674 13,114 39,294 $ 92,135 $ 25,625 $ 25,625 $ ===92='=13=5= The notes to the basic financial statements are an integral part of this statement. -10- TURNER COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2004 EXHIBIT"H" ADDITIONS Investment Earnings Interest DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 1 625 $ 1180 $ 445 25,180 $ ===25='=62=5= The notes to the basic financial statements are an integral part of this statement. - 11 - TURNER 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 Turner County Board ofEducation (School District) was established under the laws ofthe 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. 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 Turner County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofintemal 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: - 12 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds, grants from the Georgia Department of Education, grants from Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust fund reports trust arrangements under which income provide scholarship aid to graduating seniors of the Turner County School District. Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and - 13 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"!" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation ofthe United States government, - 14 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Turner County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on September 10, 2003 (levy date). Taxes were due on December 20, 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 Turner 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 $2,036,893. The tax millage rate levied for the 2003 tax year (calendar year) for the Turner County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 13.5 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $884,151 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. - 15 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Construction in Progress Any Amount $ 10,000 $ 10,000 $ 10,000 $ 10,000 NIA 15 years 25 to 60 years 10 years NIA Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 16 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 ofNet Assets. DEFICIT FUND BALANCES The fund reporting a deficit fund balance at June 30, 2004, is as follows: Fund Type/Fund Name Deficit Balance Governmental Fund Type General Fund $ 7,818 Turner County Board ofEducation anticipates an additional $200,000 in property taxes due to a reevaluation of real property in Turner County. The School District also anticipates a significant increase in state funding in fiscal year 2005. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. 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, - 17 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 3: DEPOSITS (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $2,266,115. The amounts of the total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2004, as follows: Risk Category Bank Balance 1 $ 707,974 2 34,044 3 1,524,097 Total $ 2,266.115 - 18 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July I, 2003 Increases Balances Decreases June 30, 2004 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 565,565 $ 31,258 $ 534,307 552,943 $ 1,359,793 474,865 1,437,871 Total Capital Assets Not Being Depreciated $ 1,118,508 $ 1,359,793 $ 506,123 $ 1,972,178 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 10,616,009 $ 1,659,754 1,266,824 181,727 $ 132,294 487,626 898,900 $ 9,898,836 1,792,048 1,754,450 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 2,519,874 993,124 658,373 164,534 122,534 85,230 622,676 2,061,732 1,115,658 743,603 Total Capital Assets, Being Depreciated, Net $ 9,371,216 $ 429,349 $ 276,224 $ 9,524,341 Governmental Activity Capital Assets - Net $ 10,489.724 $ 1,789.142 $ 782.347 $ 11,496.519 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services General Administration Maintenance and Operation of Plant Student Transportation Services Enterprise Operations Food Services $ 158,704 $ 40,480 12,109 42,926 107,610 203,125 1,408 9,061 - 19 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and Georgia State Financing and Investment Commission (GSFIC) funds are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2004, were as follows: District-wide Capital Projects Bond Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions $ 496,745 $ 319,553 Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to _employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability 2003 2004 $ 0 $ 2 419 $ 2 419 $ 0 $ 0 $ 11,092 $ 11,092 $ 0 - 20- TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 7: RISK MANAGEMENT The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Assistant Superintendent Each Principal $ 100,000 $ 10,000 $ 6,000 Note 8: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2001 3.685% $ 2,035.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2003 $ 2,500,000 Deductions Debt Retired 465,000 Balance June 30, 2004 $ 2,035.000 Portion of Long-Term Debt Due within One Year $ 480,000 At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows: - 21 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 8: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2005 2006 2007 2008 $ 480,000 $ 500,000 520,000 535,000 66,146 48,090 29,296 9 857 Total Principal and Interest $ 2,035.000 $ 153,389 Note 9: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $143,834 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $137,378 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $5,603 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $853 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: - 22 - TURNER COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "I" Note 10: SIGNIFICANT COMMITMENTS Project Unearned Executed Contracts Funding Available From State 03LW/02S-742-023 04/FED-742-069 $ 9,111 $ 34,781 383,248 690,557 $ 392,359 $ 725,338 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. Note 12: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees 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% $ 885,094 $ 875,171 $ 847,064 - 23 - TURNER 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 Community Services Food Services Operation Capital Outlay Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL {1) FINAL (1) ACTUAL AMOUNTS $ 1,662,641 $ 1,662,641 $ 2,048,364 20,000 20,000 8,952 8,791,667 9,308,397 9,401,701 1,092,470 4,035,040 3,284,503 87,300 87,300 77,096 16,500 16,500 8,734 15 000 15 000 577 366 $ 11,685,578 $ 15,144,878 $ 15,406,716 $ 8,134,572 $ 10,422,074 $ 10,266,001 402,940 374,416 181,619 238,151 637,790 163,620 795,702 451,710 8,000 13,500 29,000 749,562 695,395 437,387 181,619 523,671 699,540 163,620 802,782 503,429 8,000 405,714 29,000 749,562 627,341 356,137 195,203 463,819 650,615 157,335 797,206 439,075 7,500 466,496 247,327 35,497 810,228 7785 $ 12,180,582 $ 15,621,793 $ 15,527,565 $ -495 004 $ -476 915 $ -120 849 $ 42,000 $ 42,000 -42 000 -42 000 $ 0 $ 0 $ -495,004 $ -476,915 $ -120,849 968 754 968 754 535,245 $ 473 750 $ 491 839 $ 414 396 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. -25- TURNER 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) Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning Child and Adult Care Food Program Total U. S. Department of Agriculture Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Direct Twenty-First Century Community Learning Centers Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Rural Education Safe and Drug-Free Schools and Communities School Renovation - Schools State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U.S. Department of Education Health and Human Services, U. S. Department of Direct Rural Health Outreach and Rural Network Development Program Pass-Through From Georgia Department of Human Resources Block Grants for Prevention and Treatment of Substance Abuse Total U. S. Department of Health and Human Services Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program Total Federal Financial Assistance NIA= Not Available - 26 - CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD .. 10.553 10.555 NIA NIA $ $ (2) 703,577 703,577 10.550 10.558 NIA NIA $ 52,523 (2) 756,100 84.027 84.173 NIA $ NIA $ 348,555 12,900 361,455 84.287 84.318 84.367 84.358 . 84.186 84.352 84.298 84.010 84.048 NIA N/A NIA N/A NIA NIA N/A N/A $ 505,956 84,728 178,931 53,324 22,717 434,680 16,844 879,888 34,930 2,573,453 93.912 93.959 $ NIA $ 269,113 15,000 284,113 $ 43,662 $ ====3=,6=5=7=,3=28= TURNER 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 Child and Adult Care Food Program ($7,705) and the School Breakfast Program ($146,693) 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 Turner 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. - 27 - TURNER COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2004 SCHEDULE "3" AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program 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 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 Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Health Insurance National Teacher Certification Preschool Handicapped Program Teachers' Retirement Lottery Program Student Information Systems GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 510,484 $ 510,484 346,631 144,504 834,645 447,571 388,023 293,358 37,914 1,135,225 769,224 474,577 621,697 57,324 42,998 2,751 12,437 262,247 13,500 85,678 161,710 52,063 33,104 344,975 379,330 474,301 243,002 55,942 19,500 51,048 6,650 658 337,424 668,970 54,128 123,761 -418,321 15,422 23,758 137,378 5,625 49,178 5,603 83,534 346,631 144,504 834,645 447,571 388,023 293,358 37,914 1,135,225 769,224 474,577 621,697 57,324 42,998 2,751 12,437 262,247 13,500 85,678 161,710 52,063 33,104 344,975 379,330 474,301 243,002 55,942 19,500 51,048 6,650 658 337,424 668,970 54,128 123,761 -418,321 15,422 23,758 137,378 5,625 49,178 5,603 83,534 -28- TURNER COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004 SCHEDULE "3" AGENCY/FUNDING GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects Juvenile Justice, Georgia Department of Youth Development Model Office of Treasury and Fiscal Services Public School Employees Retirement GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 322,021 $ 322,021 $ 11,317 11,317 853 853 $ 9,401,701 $ 322,021 $ 9,723,722 See notes to the basic financial statements. - 29 - TURNER COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2004 SCHEDULE "4" PROJECT Acquiring, constructing, and equipping a new JROTC Facility, renovating and/or adding to existing schools in the School District, including, without limitation, Band and Choral Room additions, acquiring any necessary real or personal property and equipment, including without limitation, future school sites and school buses, and adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of the School District, including, without limitation, athletic, transportation, maintenance and plant service facilities and technology upgrades to all School District facilities, and paying expenses incident thereto ORIGINAL ESTIMATED COST(1) CURRENT ESTIMATED COSTS(2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 3,975,000 $ 3,975,000 $ 1,869,344 $ 1,667,793 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 Turner County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 30 - TURNER 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 II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program 394,000 $ 165,710 921,669 514,169 431,096 350,794 41,255 1,247,129 855,886 527,679 838,927 316,965 22,610 95 270 470,868 $ 89,084 736,630 387,294 611,960 279,813 38,077 1,222,679 1,102,759 719,634 542,726 526,620 17,021 214,610 119,291 100,260 10,411 $ 31,842 20,449 48 23,211 46,208 43,523 5,452 4,943 237 25,215 1 631 481,279 89,084 768,472 387,294 632,409 279,813 38,125 1,245,890 1,148,967 763,157 548,178 531,563 17,258 239,825 119,291 101 891 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 6,723,159 $ 7,179,326 $ 213,170 $ 7,392,496 Media Center Program Staff and Professional Development 180,589 36689 158,946 3,270 18,459 18 378 177,405 21 648 TOTAL QBE FORMULA FUNDS $ 6 940437 $ 7,341,542 $ 250,007 $ ===-7'6=59=1='=,5=4=9 (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. - 31 - 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 29, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Turner 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 Turner County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Turner County Board of Education's basic financial statements and have issued our report thereon dated March 29, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Turner County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. 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 Turner County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7421-04-01, FS-7421-04-02 and FS-7421-04-03. 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 none of the reportable conditions described above is a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Turner 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 Turner County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2004YB-30 Rusell W. Hinton 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 29, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Turner County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance ofTurner County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2004. Turner County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe 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 Turner County Board of Education's management. Our responsibility is to express an opinion on Turner County Board of Education's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Turner 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 Turner County Board of Education's compliance with those requirements. 2004SA-10 In our opinion, the Turner County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2004. Internal Control Over Compliance The management of Turner 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 Turner 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 ofexpressing 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 ofthe management, members ofthe Turner 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, ~ sell W. Hinton State Auditor RWH:as 2004SA-10 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS TURNER COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7421-03-01 FS-7421-03-02 Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Reponses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7421-03-01 The Turner County School District plans to continue its efforts to insure that the accounting functions of custody, record keeping, and authorization are segregated using existing school staff to address the need for additional separation of duties noted in this finding. The School District will also continue efforts to establish controls and a monitoring process to insure that transactions are processed according to established procedures. EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7421-03-02 The Turner County School District is in contact with the Department of Community Health (DCH) and has provided them all information and documentation they requested. The School District is awaiting DCH's decision regarding the appropriateness ofthe health care plan transfers that were made in fiscal year 2003 and their determination regarding any additional payment due. SECTION IV FINDINGS AND QUESTIONED COSTS TURNER 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 Turner 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 Turner County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Budget Preparation/Execution Revenues/Receivables/Receipts Expenditures/LiabilitieslDisbursements Employee Compensation None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Turner County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Turner 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 Turner County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Turner County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.352 School Renovation - Schools 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Turner County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. - 1- TURNER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-7421-04-01 At June 30, 2004, the General Fund of the Turner County School District reported a deficit fund balance in the amount of $7,818 which is considered to be an irregularity in accordance with O.C.G.A. 20-2-67. This condition occurred because management approved expenditures in excess offunds available in the General Fund. The School District should establish appropriate policies and procedures designed to ensure that in future periods the School District does not report a deficit. CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7421-04-02 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. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. 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. -2- TURNER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated from Prior Year Finding Control Number: FS-7421-04-03 During the fiscal year ended June 30, 2004, the School District utilized a process to reduce employer cost associated with health insurance plans administered by the Georgia Department ofCommunity Health (DCH). The School District, moved/classified employees from the Health Insurance Plan for Public School Teachers (See OCGA Title 20, Chapter 2, Article 17, Part 6, Sub Part 1) to the Health Insurance Plan for Public School Employees (See OCGA Title 20, Chapter 2, Article 17, Part 6, Sub Part 2). According to DCH, School District employees who are to be included as members of the Health Insurance Plan for Public School Teachers (PST) are either: 1. Employed in a professionally certificated position; employee holds a valid certification; employee is assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member of the Teachers Retirement System or other public school retirement system. Or: 2. Employed in a professionally certificated capacity; employee holds a valid certification; employee is not assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member of the Teachers Retirement System or other public school retirement system. With respect to membership in the Health Insurance Plan for Public School Employees (PSE) Georgia Laws OCGA 20-2-910 and 47-4-2 (20) provide that the definition of public school employee, for the purpose ofmembership in the Health Insurance Plan for Public School Employees, means classroom aides, paraprofessionals, noncertified administrative and clerical employees, school bus drivers, school lunchroom personnel, school maintenance personnel and school custodial personnel. Generally, in order to determine which School District employees are eligible for the PSE or for the PST insurance plans, a comparison should be made ofthe employee's position and DCH's criteria listed above. Ifthe employee meets either test, then the employee is eligible for the Health Insurance Plan for Public School Teachers. If the employee fails both of the above tests, the employee is eligible for the Health Insurance Plan for Public School Employees. -3- TURNER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated from Prior Year Finding Control Number: FS-7421-04-03 From information provided by the School District, it is not clear that all of these employees who were moved/classified from the PST plan to the PSE plan are eligible for membership in the PSE plan under DCH's criteria. The School District should establish policies and procedures to ensure that employer contributions for employee health insurance plans are paid in accordance with State Laws. In addition, the School District should contact the Georgia Department of Community Health to determine whether the employees who were moved from the PST plan were moved in error. If employees were moved in error the affected employees should be returned to the PST plan and the School District should make payment to DCH for those employees. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -4- SECTIONV MANAGEMENT'S RESPONSES TURNER COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FS-7421-04-01 We concur with this finding. Our efforts to ensure that the unreserved General Fund Balance is not in deficit at the end of the fiscal year include the following measures: We have begun to spend some of the funds reserved for bus replacement, thus reducing the reserved portion of the fund equity. We are anticipating an additional $200,000 in local revenue during the current fiscal year, due to the re-evaluation of real property in Turner County. Based on the fiscal year 2005 mid-term allotment sheets, we are anticipating increased state funding in both the current and next fiscal year. Finding Control Number: FS-7421-04-02 We concur with this finding. We are pleased that our corrective action plan implemented to address this finding in the prior year has resulted in adequate documentation of expenditures within the principals' accounts. We plan to continue our efforts to ensure that the accounting functions of custody, record keeping, and authorization are segregated using existing school staffto address the need for additional separation of duties noted in this finding. To this end, the Superintendent has developed a flow chart for transaction handling and met with school principals and bookkeepers regarding its use. We will also continue our efforts to establish controls and a monitoring process to ensure that transactions are processed according to established procedures. Finding Control Number: FS-7421-04-03 We concur with this finding. As specified in our response to this finding in the previous fiscal year, we are in contact with the Department ofCommunity Health (DCH) and have provided them with all information and documentation they have requested. DCH has issued an initial finding and requested payment from the School District. Because of our belief that we correctly classified employees in both the Health Insurance Plan for Public School Employees and the Health Insurance Plan for Public School Teachers based on current definitions and regulations provided to management by DCH, we do not believe the School District should be liable for any additional payment for these employees who were reported as noncertified, in good faith, based on the information available to the School District and DCH rules and regulations that were in place at the time the change in coding status occurred. We are therefore seeking administrative legislative, and perhaps a judicial determination of the School District's liability. We are also re-evaluating all current personnel placement in both Health Insurance Plans to determine whether or not changes in memberships need to be considered based on current DCH definitions. Contact Person: Ray Jordan, Superintendent Phone: (229) 567-3338 Fax Number (229) 567-3285 E-mail Address: rjordan@tumer.k12.ga.us