TWIGGS COUNTY BOARD OF EDUCATION JEFFERSONVILLE, 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 TWIGGS 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 11 H 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 29 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 30 3 SCHEDULE OF STATE REVENUE 31 TWIGGS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 32 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 33 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON 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 TWIGGS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 February 2, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Twiggs County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Twiggs 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 Twiggs County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Twiggs County Board of Education, 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 Twiggs 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 February 2, 2005, on our consideration of the Twiggs 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. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 29, 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 Twiggs County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24. Respectfully submitted, RWH:gp 2004ARL-11 Russell W. Hinton State Auditor TWIGGS COUNTY BOARD OF EDUCATION TWIGGS 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 Short-Term Debt Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit) Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3 - EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 740,460 3,827,080 240,336 696,066 1,112,934 13,074 23,649 143,814 532,496 4,744,670 11,521,581 2,032,744 -5 745 007 $ ===1=9==8=8=3==8=97= $ 1,088,430 1,045,250 900,000 59,166 50,415 179,828 5 117 863 $ 8 440 952 $ 11,211,838 219,221 1,351,915 120,624 -1460653 $ 11 442 945 $ ===1=9=,8=8=3,=8=97= TWIGGS COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2004 EXPENSES CHARGES FOR SERVICES GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities $ 9,904,243 $ 211,980 728,040 199,510 700,742 869,300 239,712 1,165,551 920,678 35,396 199,420 50,872 856,318 46994 16,128,756 $ 88,333 254 89,632 178,219 General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -4- EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 6,285,515 140,881 658,465 120,221 645,230 407,428 985 332,874 459,402 $ 198,633 51,924 696,849 $ 9,998,407 $ $ 85,862 85,862 $ -3,530,395 -71,099 -69,575 -79,289 -55,512 -461,872 -238,727 -832,677 -375,414 -35,396 -533 1,052 -69,837 -46 994 -5,866,268 $ 3,307,235 635,497 41,958 352,277 -27,210 2 989 $ 4 312 746 $ -1,553,522 12 996 467 $ ===1=1=,4=4=2=,9=45= -5- TWIGGS COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2004 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Short-Term Debt Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 692,070 $ 477,461 $ 1,169,531 $ 3,058,790 768,290 3,827,080 189,245 696,066 1,112,934 13,074 23,649 106,164 295,409 696,066 1,112,934 13,074 23,649 $ 2,727,038 $ 3,058,790 $ 1,351,915 $ 7,137,743 $ $ 1,087,631 1,045,250 900,000 50,037 $ 3,082,918 $ 429,071 799 59,166 378 489 414 $ 429,071 1,088,430 1,045,250 900,000 59,166 50415 $ 3,572,332 $ 195,572 $ 195,572 $ 1,351,915 1,351,915 23,649 23,649 $ 2,569,376 2,569,376 -575,101 -575 101 $ -355,880 $ 2,569,376 $ 1,351,915 $ 3,565,411 $ 2,727,038 $ 3,058,790 $ 1,351,915 $ 7137 743 The notes to the basic financial statements are an integral part of this statement. -6- TWIGGS 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 $ 3,565,411 $ 143,814 532,496 4,744,670 11,521,581 2,032,744 -5,745,007 13,230,298 -55,073 $ -4,740,000 -529,067 -28,624 -5,297,691 Net Assets of Governmental Activities (Exhibit "A") $ 11,442,945 The notes to the basic financial statements are an integral part of this statement. -7 - TWIGGS 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 Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES Capital Leases Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,571,255 41,958 6,411,823 3,774,252 $ 178,219 7,151 5,002 $ 13,989,660 $ $ 250,471 35,550 286,021 $ $ 635,497 -69,911 565,586 $ 3,571,255 677,455 6,411,823 4,024,723 178,219 -27,210 5 002 14,841,267 $ 9,112,360 211,980 728,040 199,510 701,349 869,300 239,659 1,160,932 963,985 34,622 196,781 50,872 815,240 5,830 $ 1,427,449 183,720 $ $ 15,474,180 $ 1,427,449 $ $ -1,484,520 $ -1,141,428 $ $ 45,000 46,994 91 994 $ 473,592 $ 9,112,360 211,980 728,040 199,510 701,349 869,300 239,659 1,160,932 963,985 34,622 196,781 50,872 815,240 1,433,279 228,720 46 994 16,993,623 -2,152,356 712 787 712 787 $ -771,733 $ -1,141,428 $ 473,592 $ -1,439,569 424,076 3,710,804 878,323 5,013,203 -8,223 -8 223 Fund Balances - Ending $ -355,880 $ 2,569,376 $ 1,351,915 $ ==3=-'=56=5'=,4=11= The notes to the basic financial statements are an integral part of this statement. -8- TWIGGS COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2004 EXHIBIT "F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. In the Statement of Activities, only the gain on the sale of the equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the equipment sold. Some of the School District's Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability. 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 Capital Lease Payments Total Long-Term Debt Repayments Food Inventories are expensed on the District-wide Statements using the consumption method while on the fund level Food Inventories are recorded as expenditures when purchased. In the current period this difference amounts to. 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: Decrease in Compensated Absences $ -1,439,569 $ 1,238,913 -598,220 640,693 -264,020 -2,012 -712,787 $ 45,000 183,720 228,720 -8,223 3,676 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==-=1=,5=5=3=,5=22= The notes to the basic financial statements are an integral part of this statement. -9- TWIGGS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ===22='=40=9= $===22='=40=9= The notes to the basic financial statements are an integral part of this statement. - 11 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Twiggs County Board of Education (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. The Twiggs County Recreation Authority was created by House Bill 1897 during the 1996 session of the Georgia General Assembly. The purpose of the Authority is to acquire, construct, own and convey real and personal property for the benefit ofthe citizens of Twiggs County. The members of the Authority consist of the Chairperson of the Twiggs County Board of Education, the Superintendent of the Twiggs County Board of Education, the Chairperson of the Board of Commissioners ofTwiggs County, one non-governmental citizen member appointed by the Twiggs County Board of Education and one non-governmental citizen member appointed by the Board of Commissioners of Twiggs County. The Twiggs County Recreation Authority is a component unit of the Twiggs County Board of Education and as such, the Authority's financial activity has been blended with the Twiggs County Board of Education's basic financial statements. 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 Twiggs 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. - 12 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. 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 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 type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. - 13 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District 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 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 and equity investments are reported at fair value. The Official Code of Georgia 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 of return 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 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" 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 Twiggs County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 2, 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 Twiggs County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes 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 $3,571,255. The tax millage rate levied for the 2003 tax year (calendar year) for the Twiggs County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 17.45 mills - 15 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" 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 $635,497 and is to be used for debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the District-wide 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 (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All NIA $ 5,000 20 to 80 years $ 5,000 10 to 80 years $ 5,000 3 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 16 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" 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 of Net Assets. DEFICIT FUND BALANCES Funds reporting a deficit fund balance and deficit net assets at June 30, 2004, are as follows: Fund Type/Fund Name Deficit Balances Governmental Activities Governmental Funds General Fund $ 1,460,653 $ 575,101 The millage rate was increased by 1 mill from 17.45 to 18.45 for the 2004-2005 school year. The Twiggs County Commission also increased their rate by 5 mills during the same year. The Board of Education will consider raising the millage rate again in 2005-2006. A Reduction in Force plan is underway to: (1) eliminate any positions not required by law; and/or (2) eliminate any positions not essential to the implementation ofK-12 education and effective management of the School District. Further analysis ofany grant or program lines that might support the educational process without supplanting will also be considered. Other expenditures not deemed essential or emergency have been eliminated from the system budget. 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. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. - 17 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities 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 ofthe State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $1,433,431. 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: - 18 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Risk Category Bank Balance 1 $ 327,591 2 1,105,840 3 0 Total $ 1,433.431 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. 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 ofthe School District's total investments was $3,826,807 which is materially the same as fair value. The investments are classified as to risk categories as follows: Tme oflnvestment U. S. Government $ Local Government Investment Pools Total Investments Risk Categories 2 3 0 $ 450 022 $ Carrying Amount Fair Value $ 450,092 $ 450,092 3,376,715 3,376,715 $ 3 826 807 $ 3 826 807 The carrying amounts shown above include amounts maintained in an investment pool by the State ofGeorgia, Office ofTreasury and Fiscal Services in which the School District owns no identifiable securities. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission (SEC) as an investment company but does - 19 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS 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. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: - 20- TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 5: CAPITAL ASSETS Balances July I, 2003 Increases Decreases Balances June 30, 2004 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 143,814 $ 0 $ 532,496 0 $ 143,814 532,496 Total Capital Assets Not Being Depreciated $ 143,814 $ 532,496 $ 0 $ 676,310 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 11,238,403 $ 1,944,742 4,625,110 283,178 303,679 $ 119,560 $ 11,521,581 215,677 2,032,744 4,744,670 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 3,407,215 1,420,927 532,310 228,461 136,357 233,402 213,665 3,635,676 1,343,619 765,712 Total Capital Assets, Being Depreciated, Net $ 12,447,803 $ 108 197 $ 2,012 $ 12,553,988 Governmental Activity Capital Assets - Net $ 12,591.617 $ 640.693 $ 2,012 $ 13,230,298 Current year depreciation expense by function is as follows: Instruction Support Services Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 451,938 $ 15,606 110,809 1467 127,882 18,400 $.=~5.,..98~,2~2=0 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2004, were as follows: - 21 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 6: RESTRICTED ASSETS District-wide Capital Projects Bond Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Restricted Investments: Debt Services Capital Acquisitions $ $ $ 3,058,790 477,461 768,290 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 of loss associated with torts, assets and errors or omissions. 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: 2003 2004 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 3 910 $ 3 910 $ 0 $ 0 $ 10 719 $ 10 719 $ 0 - 22 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 7: RISK MANAGEMENT The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Finance Director Principals Each Assistant Principal School Bookkeepers Curriculum Director $ 500,000 $ 500,000 $ 30,000 - $ 100,000 $ 50,000 $ 10,000 - $ 30,000 $ 50,000 Note 8: OPERATING LEASES Twiggs County Board of Education has entered into various leases as lessee for copiers and equipment. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2004, for governmental funds amounted to $88,368. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds 2005 2006 2007 2008 $ 81,163 52,188 37,428 9138 Total Note 9: SHORT-TERM DEBT The School District issues tax anticipation notes in advance ofproperty tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount of short-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. - 23 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 9: SHORT-TERM DEBT Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $=====0 $ 900,000 $====='=0 $ 900,000 Note 10: LONG-TERM DEBT CAPITAL LEASES The Twiggs County Board ofEducation has entered into a lease agreement as lessee for computers. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception. 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 - Twiggs County Recreation Bonds - 2001 General Government - QZAB - Series 2002 4.95% 0.00% $ 905,000 3,835,000 $ 4,740,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows: -24- TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 10: LONG-TERM DEBT Capital Leases Governmental Funds Twiggs County Recreational Compensated Authority Absences Bonds General Obligation Bonds Total Balance July 1, 2003 $ 0 $ 32,300 $ 950,000 $ 3,835,000 $ 4,817,300 Additions Capital Leases Annual Leave Earned 712,787 4,512 712,787 4,512 Deductions Annual Leave Utilized Debt Retired 183,720 8,188 45,000 8,188 228,720 Balance June 30, 2004 $ 529.067 $ 28624 $ 905 000 $ 3 835 000 $ 5.297.691 Portion of Long-Term Debt Due within One Year $ 151,204 $ 28,624 $ 0 $ 0 $ 179,828 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 Ca:gital Leases Princi:gal Interest 2005 2006 2007 2008 $ 151,204 $ 160,497 170,360 47,006 32,516 23,223 13,359 2,889 Total Principal and Interest $ 529,067 $ 71 987 Fiscal Year Ended June 30 Twiggs County Recreation Authority Debt Princi:gal Interest General Obligation Debt Princi:gal 2005 2006 2007 2008 2009 2010 - 2014 2015 - 2019 $ 0 $ 22,399 50,000 43,560 50,000 41,085 50,000 38,610 55,000 36,011 310,000 136,620 390,000 49 995 $ 3,835,000 Total Principal and Interest $ 905,000 $ 368,280 $ 3,835.000 - 25 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $103,935 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $102,303 Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $1,632 Note 12: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2004: Project Unearned Executed Contracts QZAB Project - Repairs and Renovations to All Schools $ 1,664,969 The amount described in this note is not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. Note 14: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and - 26 - TWIGGS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 14: 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% $ 641,704 $ 679,768 $ 661,980 - 27 - TWIGGS 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 Community Services Food Services Operation Capital Outlay Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES Other Sources Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period NONAPPROPRIATED BUDGETS ORIGINAL (1} FINAL{1} ACTUAL AMOUNTS $ 3,775.000 $ 3.775.000 $ 6,422,130 4,085,528 85,985 12,900 131 250 6,422,130 4,085,528 85,985 12,900 131 250 $ 14,512,793 $ 14,512,793 $ 3,571,255 41,958 6,411,823 3,774,252 178,219 7,151 5 002 13,989,660 $ 8,678,178 $ 8,853,979 $ 314,430 648,819 199,782 764,215 1,057,317 255,932 922,848 808,805 33,499 172,230 48,060 813,052 314,446 837,939 199,782 780,991 1,057,354 255,932 922,848 808,805 33,499 172,230 48,060 814,353 $ 14 717 167 $ 15,100,218 $ $ -204,374 $ -587,425 $ 9,112,360 211,980 728,040 199,510 701,349 869,300 239,659 1,160,932 963,985 34,622 196,781 50,872 815,240 5,830 183 720 15 474 180 -1,484,520 $ -204,374 $ -587,425 $ 775,945 775,945 -118 462 -118 462 712,787 -771,733 424,076 -8 223 Fund Balances - Ending $ 453109 $ 70 058 $ -355 880 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 - TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2004 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Even Start Improving Teacher Quality State Grants Reading Excellence - Local Reading Improvement Reading First State Grants School Renovation - Schools State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States Total U. S. Department of Education Health and Human Services, U. S. Department of Pass-Through From Children and Youth Coordinating Council Abstinence Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 10.550 N/A (2) N/A $ _ _ _~7~2~4~,3~6~8 $ 724,368 N/A 40,303 84.027 84.173 N/A $ N/A $ 259,446 9,916 269,362 84.318 84.213 84.367 84.338 84.357 * 84.352 84.298 84.010 * 84.287 84.048 N/A N/A N/A NIA N/A N/A NIA N/A N/A N/A $ 17,602 225,558 170,005 566,467 79,264 570,052 26,564 742,984 592,159 37,002 3,297,019 93.235 N/A $ 92,072 Total Federal Financial Assistance $ NIA= Not Available Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($191,337) 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 Twiggs 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. - 30- 4,153,762 TWIGGS 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 Leaming 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 Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Health Insurance Preschool Handicapped Program Lottery Program Student Information System Conversion Human Resources, Georgia Department of Family Connection Northwest Georgia Regional Educational Service Agency Student Achievement Office of Treasury and Fiscal Services Public School Employees Retirement OTHER Community Affairs, Georgia Department of State Youth Apprenticeship Grant See notes to the basic financial statements. - 31 - SCHEDULE "3" GOVERNMENTAL FUND TYPES GENERAL FUND $ 320,565 286,303 15,791 669,602 142,719 375,264 76,879 203,307 564,484 521,926 353,932 660,198 10,115 38,630 62,292 110,143 36,354 22,387 271,994 349,330 329,171 371,683 85,862 19,500 43,761 4,981 18,015 197,862 178,633 46,720 23,390 -327,742 13,784 25,246 102,303 14,977 31,535 73,975 60,000 1,632 4 320 $ 6411 823 TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2004 SCHEDULE "4" PROJECT Payment of general obligation payments under intergovernmental contract with Twiggs County Recreational Authority coming due January 1, 1998 and thereafter ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 3,337,325 $ 3,337,325 $ 91 994 $ 2,686,772 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 costs for the project. Includes all costs from project inception to completion. (3) The voters of Twiggs 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. - 32 - TWIGGS COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2004 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1} (2} ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 356,087 $ 232,693 $ 3,741 $ 236,434 23,275 36,131 36,131 832,802 1,007,709 21,931 1,029,640 191,142 207,829 2,467 210,296 463,901 436,357 14,481 450,838 105,883 250,966 689,591 639,894 441,689 792,926 18,566 44,360 76,469 132,851 272,475 969,419 895,933 399,650 4,805 115,376 446,841 35,321 69,791 33,124 236,826 6,729 25,935 21,177 27,868 79,146 174,405 21,605 355 132,851 279,204 995,354 917,110 427,518 4,805 194,522 621,246 56,926 70,146 33,124 236,826 $ 4,927,551 $ 5,533,131 $ 399,840 $ 5,932,971 136,074 27 361 184,830 9,050 13,393 28 757 198,223 37 807 TOTAL QBE FORMULA FUNDS $ 5,090,986 $ 5,727,011 $ 441 990 $====6,=16=9=,0=0=1 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 33- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 February 2, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Twiggs 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 Twiggs County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Twiggs County Board of Education's basic financial statements and have issued our report thereon dated February 2, 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 Twiggs 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 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 Twiggs County Board of Education'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-7431-04-01. 2004YB-30 A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Twiggs 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 Twiggs County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~tll.~ Russell W. Hinton State Auditor RWH:gp 2004YB-30 Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 February 2, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Twiggs 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 ofTwiggs County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2004. Twiggs 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 Twiggs County Board of Education's management. Our responsibility is to express an opinion on Twiggs 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 Al 33, 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 Twiggs 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 Twiggs County Board of Education's compliance with those requirements. 2004SA-40 In our opinion, the Twiggs 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. The results of our auditing procedures disclosed instances ofnoncompliance with those requirements, which are required to be reported in accordance with 0MB Circular A-133 and which are described in the accompanying Schedule of Findings and Questioned Costs as items FA-7431-04-01 and FA-7431-04-02. Internal Control Over Compliance The management of Twiggs 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 Twiggs 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. We noted certain matters involving the internal control ov~r compliance 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 compliance that, in our judgment, could adversely affect the Twiggs County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-7431-04-01 and FA-7431-04-02. 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 ofrisk that noncompliance with the applicable requirements of laws, 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. Our consideration ofthe internal control over compliance 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. This report is intended solely for the information and use of the management, members of the Twiggs County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~w.~ Russell W. Hinton State Auditor RWH:gp 2004SA-40 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS TWIGGS 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-7431-03-01 Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditures Finding Control Number: FS-7431-03-01 The Twiggs County Board of Education was made aware of outstanding debt that totaled $34,682 in items that had been charged by coaches that no longer worked for Twiggs County High School. The Board of Education assisted the high school in resolving this issue that required immediate resolution. The Board of Education then implemented procedures to insure that this did not occur again. The monitoring procedure includes the ordering and receipting of all items for athletics through the School Bookkeeper. The records are reviewed and approved on a daily basis by the School Principal. Reports are sent to the Twiggs County Board of Education on a monthly basis, reviewed by a system School Activity Account coordinator, and presented to the Director of Finance. Any discrepancies in the reporting or concerns about the process are forwarded to the Assistant Superintendent of Operations and the Superintendent. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-7431-03-01 Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS TWIGGS 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 Twiggs 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 Twiggs County Board of Education disclosed a financial statement reportable condition related to the following control category. Budget Preparation/Execution The reportable condition described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Twiggs 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 Twiggs County Board of Education disclosed reportable conditions in internal control over major programs for the following compliance requirements. Davis-Bacon Act Special Tests and Provisions The reportable conditions described above are not considered to be material weaknesses. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Twiggs County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Twiggs County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report. 7. Major Programs Federal awards audited as major programs are as follows: 84.287 Twenty-First Century Community Leaming Centers 84.352 School Renovation - Schools 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Twiggs County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-7431-04-01 At June 30, 2004, the General Fund of Twiggs County Board of Education reported a deficit fund balance in the amount of $575,101, 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. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS DAVIS-BACON ACT Failure to Monitor Labor Reports Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7431-04-01 Contracts for Federally funded construction projects must contain specific provisions regarding labor standards in order to comply with regulations of the Davis-Bacon Act. The provisions of the Act require contractors and subcontractors to submit to the School District, weekly, a statement of compliance with Federal wage provisions and a copy of all payrolls. A review ofthe Twiggs County Board of Education's compliance with these provisions for the School Renovation Grant (CFDA 84.352) disclosed that the School District did not properly monitor the required labor reports. The situation occurred because management disregarded Davis-Bacon Act provisions. Procedures should be established by the School District to ensure compliance with Davis-Bacon Act Provisions. Weekly copies of payrolls should be reviewed and maintained by the School District as required by the Act. -2- TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Failure to Invite Private Schools/Parents and Community Members to Participate Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7431-04-02 Provisions of Section 321 of Public Law 106-554 and U. S. Department of Education publications require that a local School District must provide parents, educators and interested community members an opportunity to consult and comment on the use offunds. In addition, section C33 ofthe U. S. Department ofEducation publication entitled "School Renovation, Individuals with Disabilities Act (IDEA) and Technology Grants Program" (CFDA 84.352) requires the School District to consult in a timely and meaningful manner with private school officials to invite them to participate in the development ofthe program. For the fiscal year under review, the School District could not provide documentation ofcontact with appropriate private school officials or with parents or other interested community members to determine whether they intended to participate in the planning, design and implementation of the School Renovation IDEA and Technology Grant Programs. This situation occurred because of the School District's failure to monitor the School Renovation Program Grant requirements as set forth in guidelines issued by the Georgia Department of Education. Procedures should be implemented to ensure that all eligible private schools are given the opportunity to participate in the Program, as required. Also, appropriate internal controls should be established by the School District to ensure that the parental involvement provisions provided in the approved application are followed. -3- SECTIONV MANAGEMENT'S RESPONSES TWIGGS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FS-7431-04-01 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report. Finding Control Number: FA-7431-04-01 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report. Finding Control Number: FA-7431-04-02 We have requested of management its views concerning this finding, its conclusions, its recommendations and the planned corrective actions. We have not received management's views as of the release of this audit report.